SAA on the Brink

SAA on the Brink

South African Airways (SAA) is not in a good spot. This past week saw confirmation that the flag carrier is almost bankrupt.

The airline has been teetering on the edge of bankruptcy for years. The last seven annual reports revealed that income has been dropping consistently.

Its true status was revealed when it submitted a cash-flow analysis to the South African parliament on Thursday 3rd August. The statement confirms that the airline is on the brink of bankruptcy and will not be able to pay its workers soon – the BBC reported.

SAA asked the state for R13 billion ($1 billion) to continue operating and pay off debt. The Treasury is considering the request.

The following day, finance minister Malusi Gigba briefed members of the South African parliament on a potential bailout from the Treasury.

Gigba said that a restructuring of the airline’s leadership and a new financial strategy were crucial to turning it around. SAA is also cutting routes and retiring widebody aircraft to help cut costs. The full briefing can be seen here, courtesy of SABC news.

SAA also expects to see a turnaround for its EBITDA by 2019. Its most recent annual report states that the airline plans to implement a new corporate strategy that projects profit hitting R954 million EBITDA during the next financial year.

The CEO’s statement reads: “In response to the changing macroeconomic environment, SAA has developed a three-year Corporate Plan to support the achievement of its strategic objectives. This represents the practical implementation of the LTTS (long-term turnaround strategy). The Corporate Plan projects a profit of R954 million at an EBITDA level to be achieved in year 2017/2018.”

The national treasury released a statement in July saying it would transfer funds from national revenue to pay off the airline’s debt to the UK’s Standard Chartered Bank. The airline’s debt sits at R2.207 billion ($170 million), the Treasury revealed on its Twitter feed.

SAA has also appointed a new CEO. Buyani Jarana is the chairman of pan-African service provider Vodacom and is the first appointed CEO since November 2015. Musa Zwane has been the acting CEO since.

The government has not given up on the flag carrier yet. Despite years of losses, it is still clinging on. Whether the decision to keep pumping money into the airline will bring stability remains to be seen. Appointing a permanent CEO, implementing a new strategy and cutting routes will hopefully bring some stability and savings.

Alex Baldwin
By Alex Baldwin August 9, 2017 12:50