SAA still talking to Treasury over more relief‚ says CEO

THE fact that no mention was made of the recapitalisation of South African Airways (SAA) in the 2014-15 budget did not mean the issue was no longer on the government’s agenda‚ CEO Monwabisi Kalawe said on Tuesday.

Discussions in the government about further state assistance to the financially troubled airline have been held for months without any apparent resolution. But Mr Kalawe insisted that work was under way between the Department of Public Enterprises and the Treasury to address SAA’s weak balance sheet.

The Treasury needed SAA to come up with a long-term turnaround strategy‚ which it finalised last year.

The airline has been relying on a R5bn state guarantee‚ of which Mr Kalawe said only R1.5bn had been used. But a guarantee was not ideal‚ as it involved SAA having to bear finance charges — and operating on a guarantee alone would never enable the airline to achieve the goals of its financial plan. The foundation of the plan was resolving the issue of SAA’s weak balance sheet.

In an interview after briefing Parliament’s portfolio committee on public enterprises on SAA’s 2012-13 financial results‚ Mr Kalawe said: “We did not have an expectation (of funding in the budget). There is work taking place behind the scenes between public enterprises and the Treasury to address SAA’s weak balance sheet. There is good work taking place between those departments and a recognition that SAA’s balance sheet is weak‚” he said.

“Because SAA is a state-owned entity‚ it will need the government to assist in strengthening that balance sheet. The mechanism‚ the approach‚ the timing — that is the detail the two entities are working on. As management we have done our own calculations and have presented the number to the Department of Public Enterprises which has reviewed the number and that is the number which they are discussing with the Treasury.

He added: “This is a big decision in the current climate. The economic conditions are very tough. I am confident that our shareholder and the Treasury will find a pragmatic solution to support SAA.”

Meanwhile‚ the airline was talking to the Chinese government about better slots for flights to Beijing. SAA aircraft fly three times a week on the route and land at about 8.40pm. If the flights arrived in the early afternoon‚ the airline would be able to attract better-yielding custom from passengers wishing to make connections to other parts of China.

SAA is losing R300m annually on the Beijing route but decided to keep it open in the national interest‚ on the advice of the government.

SAA chief financial officer Wolf Meyer said the airline was still battling the effects of the weaker rand. About 60% of the airline’s operating expense base was currency-driven with the biggest items being fuel‚ aircraft leases‚ maintenance‚ airport and regulatory fees. Fuel represented 35% of operating expenses.

SAA was continuing its cost-cutting drive but the weak currency was a big issue. If the currency issue was eliminated from the figures for the current financial year‚ the airline was operating much better than before. It was also seeking to boost its inflow of foreign currency by strengthening SAA Technical to do maintenance on foreign aircraft. © BDlive 2013