The results posted by State-owned regional airliner South African Express (SAX) for the 2013 financial year reflected the challenges faced by the global airline industry, which was plagued by slow economic growth, Public Enterprises Minister Malusi Gigaba said on Wednesday.

SAX saw a 14% increase in revenue and posted a net profit of R650 000, compared with a loss of R365.9-million during the previous financial year.

“SAX has managed to record a profit, which, even though it may be marginal, given the tough operating conditions, is pleasing,” Gigaba told representatives of the media at a presentation of the company’s financial results, in Johannesburg.

He added that the 14% increase in revenue was mainly the result of an increase in passenger fares and passenger load factors, as actual passenger numbers for the year had decreased.

Gigaba further said that, while the passenger side of SAX’s business was performing adequately, the cargo side of the business required more attention.

The airline managed to increase its turnover by more than R270-million, from R2.02-billion in 2012, to R2.29-billion in 2013, with operating costs remaining stable and the recognition of the deferred tax asset of R158-million based on future profits.

Further, the airline’s operating margin marked an improvement of R263-million, from an operating loss of R288.3-million in 2012, to an operating loss of R25.1-million in 2013.

SAX also saw a drop in cash used in operations from R234.2-million in 2012 to R133-million in 2013.

“It is expected that operations will be sustainable based on expected future growth levels and the implementation of the SAX 20:20 Vision, in line with South African Airways’ Long-Term Turnaround Strategy,” the airline stated.

Meanwhile, Gigaba also pointed out that SAX had managed to save R129.1-million during the financial year as a result of various cost-saving initiatives.

“Cost control would be crucial to the airline’s financial stability over the short- and medium-term,” he added.

Meanwhile, in line with its approved 15-year fleet strategy, SAX was expected to update its fleet with next-generation aircraft that would offer a comprehensive route network and improve on operational costs, in the second half of 2014.

CHALLENGES
Gigaba pointed out that slow domestic and global economic growth had had an impact on the load factors and profit margins of airlines as a result of reduced passenger demand and an increase in direct operating costs.

He added that domestic and regional market services originating at OR Tambo International Airport had become more competitive as more low-cost operators entered the market.

“We also have to recognise the impact of the African market on global economic recovery and the airline industry, which can be seen in the rise in African air travel,” the Minister said, adding that Africa saw an 8.2% year-on-year increase in international travel in March this year.

Gigaba further stated that South African airlines were facing strong competition from Middle Eastern airlines that had also recognised the importance of the African market.

“SAX would have to move swiftly to get a first-mover advantage in Africa as Middle Eastern airlines are also moving in,” he said, adding that the growth of African airlines was a concern.

“Airline growth in sub-Saharan Africa trails the global average by 12%,” Gigaba pointed out.