LETTER: SAA is an investment dud
It's hard to make an investment case for financially beleagured SAA, which needs a R21bn to get it back on its feet and be profitable
After reading the fantastic Comair results last month and all the negative articles on SAA, I was wondering what the investment return is for both airlines. Comair made just over 5% profit in 2017, a lot of it not aircraft related. The International Air Transport Association said 2017 was one of the most profitable years in the airline business, with companies making an average of 5%. Normally airlines seem happy to make 2.5% profit on turnover. So the government has to make some hard calls. Unfortunately their cookie jar is rather empty. If they pull the plug on SAA now, they lose R19.1bn. To get to the 2020 profit scenario (we have all heard this before) they need R21.7bn. If they invest R21.7bn and get a 2.5% return on their current R30bn turnover, that is a profit of only R750m. That means the return on the R21.7bn investment is 3%. For the entire R40.8bn, the return is only 0.1%. If SAA magically earned profit of 5%, which is very good in the airline industry, the return will b...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.