Gordhan tells SAA staff: up to you, survive or die
• In contrast to Tito Mboweni, public enterprises minister says there is no need to sell airline
Public enterprises minister Pravin Gordhan has indicated that he does not believe SAA, which has lost about R18bn in the past four financial years and is dependent on state guarantees, should be sold.
That is in contrast to finance minister Tito Mboweni, who told an investor conference in New York last week that the country was “unlikely to sort out the situation” and that the airline should be closed down.
Mboweni’s words attracted a predictably furious response from trade unions.
SAA CEO Vuyani Jarana — who together with the board was warned by Gordhan over the weekend to get on with restructuring the airline more speedily — told 702 Talk Radio on Monday that Mboweni had created uncertainty among customers, many of whom would normally book tickets months in advance.
The airline has been lossmaking since 2011 and has come under fire for putting strain on the fiscus. It has racked up losses of more than R18bn since the 2015 fiscal year. In the past two years, it received R10bn in bailouts and is still dependent on a R19bn state guarantee to keep it flying.
In contrast Comair, the country’s only listed airline, has generated profit for 72 consecutive years.
GOVERNMENT SUPPORT
Trade unions have been opposed to the privatisation or closing down of SAA, which has requested a further R21.7bn over the next three years in government support in order to implement its latest turnaround plan, which it believes will see it break even in 2020/21.
In the medium-term budget policy statement in October, the airline received another R5bn to repay debt.
Gordhan addressed hundreds of employees at the airline’s Kempton Park headquarters on Monday, when he was asked to “pronounce clearly” that the airline would not be privatised.
“The South African public is losing patience with SAA and doesn’t think it is viable,”
Gordhan said.
It’s for you, working together, to prove you can make this a good business.”
He said it was simple: “survive or die”.
“My view is that you can survive well, if you do the right things,” Gordhan said.
The national carrier has been looking for an equity partner as it seeks to cut its losses.
In July, the company said it had met airlines with which it had code-sharing agreements, as well as potential commercial partners, but had not discussed any possibility of them investing in SAA as part of a strategic equity partner process.
In 2015, a R2bn equity deal between Emirates and SAA was scuppered when then SAA chair Dudu Myeni, a close ally of former president Jacob Zuma, intervened and ordered then acting CEO Nico Bezuidenhout not to sign the deal.
Gordhan on Monday told SAA staff that the time would come when they would call on anyone interested in buying around a 25% share of the airline to come forward, but that was not now.
The state would remain the majority shareholder, he said.
“Nobody is going to buy SAA tomorrow. Even if you put it on sale …
“It is like going to the shop and buying a shirt and you find holes all over, and they say it is on sale. Would you buy it?
“No you won’t. You fix up the shirt and then you put it on sale,” he said.
Gordhan said the aim was to revitalise the airline and give it credibility once again.
SAA was a good airline, but a badly run business and everyone had a role to play in correcting it, he said.