This is broadly in-line with the projections contained in a Moneyweb report last August, which was based on an analysis conducted by Ratings Afrika for Moneyweb, on the basis of a leaked first quarter financial report.

In the previous financial year the embattled airline recorded a net loss of R1.4 billion and provided for a marginally higher loss in its budget for the current financial year. It however overshot the target by R2.9 billion due to lower than expected income, particularly from its air passenger business.

This comes after National Treasury provided SAA with a R4.7 billion going concern guarantee late last year that enabled the airline to finalise its financial statements for 2014/15 and 2015/16. This brought the total value of government guarantees to SAA to R19 billion.

The dire state of SAA’s finances will be scrutinised by Parliament’s Standing Committee on Finances (SCOF) on Wednesday.

SAA’s revenue of R27.6 billion for the first eleven months is marginally more than the R27.4 billion recorded in the previous financial year, but 15% below the R32.4 billion budgeted for.

While the operating costs of R29.1 billion were 9% under budget, it includes R900 million (18%) under-expenditure on aircraft maintenance, compared to the budget.

Ratings Afrika corporate governance expert Charl Kocks warned against this practice in August: “This is an area of operational risk, in the cases where maintenance is done under circumstances of financial distress, which may involve skimping on safety-related matters,” he said.

In documents sent to SCOF members SAA says the weakening of the rand by 8% compared to the previous year impacted its cost base. It states that the rand strengthened by 12% compared to the budget assumption of R16.28 to the US dollar. The weak passenger market is also blamed for its woes. The domestic and regional routes underperformed in particular and are currently being reviewed.

The airline says it has a high cost base, which is also being reviewed.

The benefits of the stronger rand on SAA’s costs was largely negated by the rising oil price. The airline based its budget on an average oil price of $35 per barrel. But in actual fact it averaged out at $48. Kocks in August referred to this as “an assumption that seems highly inappropriate in its precarious situation, and is clearly unravelling already”.

SAA’s net finance cost increased from R752 million in the previous financial year, to R1 082 million, an increase of 44% with another month until year end. This according to SAA is as “a result of more reliance on debt finance to fund the Group’s operating activities coupled with the fact that the budget assumed a level of debt consolidation which has not occurred.”

The airline’s accumulated loss amounted to R30.4 billion at the end of February and increased from R25.9 billion at the end of March 2016 while R25.8 billion was budgeted for.

Low-cost subsidiary Mango recorded a R23 million loss, which is more than the budgeted R18 million, but down from R87 million in the previous financial year.

SAA states that Mango’s market share in the eleven months to the end of February was 21.8% and its seat share 19.7%.

DA shadow minister of finance Alf Lees said in a statement on Monday the SAA loss is “significantly higher than the R3.5 billion revealed ten days ago and the R1.7 billion estimated in September 2016.”

Lees said with a full month of figures left to be reported on, the loss can still increase significantly to year end.

He said the DA will interrogate these volatile numbers fully when SAA appears before the SCOF on Wednesday.

The airline also reports to SCOF about its compliance with the conditions attached to the R4.7 billion going concern guarantee.

According to the report SAA appointed Seabury Consulting in January to review its Long-term Turnaround Strategy and the related implementation framework. This process is aimed at formulating a new corporate plan that should be finalised in June.

It further states that National Treasury appointed managing consulting firm Bain & Company to advise it on the best structure for state-owned airlines.

SAA reports that the second round of interviews for the appointment of a new CEO will take place this week with a recommendation to the board’s remuneration committee expected by mid-April. Thereafter the recommendation will be sent to the board and National Treasury for approval. A recommendation for the appointment of a CFO is already with National Treasury.

It is clear from the report that SAA is on a very short leash. The airline reports that it meets weekly with National Treasury to report on its progress. It further reports that it is in compliance with the guarantee condition to share media communication with finance minister Pravin Gordhan or his representative before it is issued and “only communicates on issues that require shareholder approval where approval has been obtained from the Minister of Finance.”

Antoinette Slabbert  Reports.