SGS expects to break even when flights reach 85%

Logo of Saudi Ground Services  Co.

Saudi Ground Services (SGS) is expected to reach the break-even point if flight rates range between 80% and 85%, Mohammed Mazi, Executive Vice President of Finance, told CNBC Arabia.  

It is difficult to determine when SGS will turn profitable, as operational growth will depend in the coming period on the resumption of international flights. SGS operations stood at 70% by the end of September, of which domestic flights accounted for 95%, while international flights represented 40%.
 

The operating rates have increased by 7% in October and November to 77%, which will have a very positive impact on the company’s results in the fourth quarter of the year.

A continuous improvement in SGS flights, operations and cost-cutting initiatives helped narrow losses, Mazi noted, adding that the company has developed initiatives to reduce operating costs by 20% in the coming years.

Elsewhere, he added that SGS has entered into facilities agreements worth SAR 2 billion with banks, of which SAR 1.250 billion was withdrawn to face any emergency. Meanwhile, the company still has strong financial solvency, without any need to use these facilities. 

Moreover, Mazi said that SGS had a cash balance – cash and amounts held with funds - of SAR 900 million pre-COVID-19 pandemic. This balance reached SAR 200 million by September-end. SGS used its working capital to finance its expenses; hence, it did not have to use those facilities.

Replying to a question about cash dividends, Mazi said it is currently difficult to reconsider this due to fluctuating operations and being unable to realize the future challenges, especially the full resumption of flights this year.

SGS trimmed its 9M 2021 net losses to SAR 153.3 million from SAR 336.2 million a year earlier.