South African Airways seems to be a bottomless pit. South African Airways (SAA) has already spent more than half of its recently approved R5 billion government bailout.
This was confirmed by the national carrier’s CEO, Vuyani Jarana, during an interview with SA Flyer Magazine editor, Guy Leitch. According to Jarana, 60% of the ‘final’ bailout has gone to settling the airline’s debts.
SAA predicated to make R5 billion loss in 2018
When South African’s found out that SAA was to receive yet another multibillion-rand bailout, a collective sigh of indignation could be heard throughout the land. The all too familiar moan of the embattled taxpayer comes in the wake of the mid-term budget speech, wherein Finance Minister Tito Mboweni begrudgingly resolved to lend SAA a helping hand.
Yet, Mboweni himself admitted that, despite the R5 billion bailout, the financial and operation quagmire stifling SAA could not be overcome. The Finance Minister’s call for the national carrier to close up shop, although well received by the general population, was met with fierce retort from trade unions and President Cyril Ramaphosa himself.
Ramaphosa argued that the shutting down of SAA was not an option. In fact, Ramaphosa painted a grim picture of ‘damned if we do and damned if we don’t’, saying:
“SAA is laden with debt. If you were to say sell SAA today you would not be able to get anything for it. In fact, you would have to pay someone billions of rands to take it off your hands.
If we were to shut it down, it basically means that the debt would become payable immediately. That debt will also immediately have an impact on the debt carried by all other state-owned enterprises, which may even collapse our fiscus.
In the end, we have to stabilise SAA.”
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SAA needs more money
That stabilisation process mentioned by Ramaphosa includes the recent bailout. But it seems this R5 billion has barely touched sides.
According to Jarana, the airline is R21 billion in debt. Worse still, is that the airline needs R12.5 billion in funding just to turn a profit. The recent R5 billion bailout forms less than half of the amount needed.
Jarana also explained that SAA is expected to make a loss of more than R5 billion in 2018 and that most of the government bailout had already been spent, saying:
“The MTBPS stated that the funds would help to prevent a call on the airline’s outstanding debt of R16.4 billion of the total of R19.1 billion guaranteed by government.
R3 billion of the R5 billion has gone into paying arrears.”
Jarana admitted that the R2 billion left over would need to be stretched. Part of the airline’s plan is to pull in R3 billion more through changes to parts procurement at SAA Technical.
Jarana says that, through cost-saving strategies and proper management, SAA could see a new dawn.
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