Sunday, January 6, 2013

■ SOUTH AFRICA: SAA gets another USD64million bailout as poor fuel sourcing deals return to haunt the carrier.

SAA logoSouth African Airways' (SA) perennial problems with sourcing competitively priced Jet A1 fuel came back to haunt it once more as reports emerge of the carrier receiving an emergency USD64million (ZAR550million) "bank facility" from its sole shareholder, the South African government. 

Had the airline failed to secure the facility reports state, then "scores of local and overseas passengers stranded after the festive season holidays."

In a statement to South African Sunday paper, the Sunday Times, South African Minister of Public Enterprises, Malusi Gigaba's spokesperson, Mayihlome Tshwete, said airlines all over the globe had experienced financial challenges in the past few months because of the "volatile economic climate".
"This is not unique to SAA. This was, in fact, foreseen by the national carrier in its request for a [R5-billion] government guarantee. As management, we will not expose the airline to the possibility of being grounded at any time," he said.
 Source [Sunday Times]

The South African national carrier has a poor track record regarding fuel sourcing. 

AirTeamImages.com /D. Pedley
In 2004 and 2008, SAA lost USD710million and USD120million respectively in fuel hedging losses (fuel hedging is an agreement between an airline and a fuel supplier to purchase vast quantities of jet fuel at a predetermined price for a specified future time period which can either benefit, or severely harm an airline's financial outlook, if mishandled). 

However, in a report to the South African Parliamentary Portfolio Committee on Public Enterprises on Tuesday 28 August 2012, SAA's Head of Corporate Finance, Phetolo Ramosebudi, said that SAA had made a profit of USD30million on its hedging operations this year having adopted a fuel hedging model developed by risk management specialists, Oliver Wyman.

In direct contrast to SAA and its sagging fortunes, The African Airlines Association's (AFRAA) this week  finalized its second bulk Jet A1 fuel tender awards for 2013 with volumes bought increasing to over 1 billion litres with the number of participating airlines also increasing from 8 to 13 members (which include two of SAA's biggest African competitors Kenya Airways and Ethiopian Airlines). 

The Pan-African initiative is said to have saved Kenya Airways almost USD2million in 2012 on fuel costs.