Jonas gives SAA board thumbs-up
Governance improves but R2-billion loss a major concern
DEPUTY Finance Minister Mcebisi Jonas gave MPs a glimmer of hope on Wednesday that the new SAA board is functioning well and has addressed some issues Finance Minister Pravin Gordhan flagged when members were appointed two months ago.
Stability of the SAA board and management – rocked by scandals, conflicts and departures over many years – is critical if the state-owned airline is to become profitable and financially self-sufficient.
But while governance may be improving, the airline is continuing to make losses, which for the first six months of the current financial year amount to R2-billion. It is worse than the R1.5-billion loss suffered for the whole of 2015-16. A R1.38-billion net loss was made in the first quarter and R765-million in the second quarter. “The new board of SAA has been functioning very well . . . the focus now needs to be on its delivery and output,” Jonas told members of parliament’s finance committee during a briefing by SAA executives on the airline’s quarterly performance.
He said the board was reviewing SAA’s long turnaround strategy, a revised version of which would be presented to the Treasury early next month for finalisation by February.
Robust discussions were being held between SAA executives and Treasury officials, he said.
Jonas said any recapitalisation would be accomplished within the airline’s balance sheet or through the sale of non-core assets within the state-owned sector without any reliance on the fiscus.
The appointment of a permanent CEO and chief financial officer was being prioritised and would hopefully be finalised by the end of February at the latest.
The Treasury was insisting that SAA continue with its cost-cutting drive, and refine its network and fleet plan.
Acting chief financial officer, Phumeza Nhantsi, told MPs market conditions had caused SAA to miss budget targets as it battles intense domestic competition.
Rivals had gouged out R1-billion in revenue in the second quarter of the 2016-17 financial year.
A bottom-line loss of R765-million was suffered compared with a budgeted R61-million loss with finance costs of R288-million having a significant effect.
Foreign exchange losses for the period amounted to R592-million, Nhantsi said. SAA lost market share due to the entry into the market of two new low-cost carriers and the fact that foreign operators such as Emirates, Ethiopian Airlines and Qatar were flying directly to Durban and Cape Town. She gave the assurance that the latest R4.7-billion state guarantee granted to SAA – that brought the total to R19-billion – would carry the airline through until September next year.
SAA’s low-cost subsidiary, Mango, made a R37-million loss in the year to end March, a reversal from the R38-million profit the previous year on a revenue growth to R2.3-billion from R2.2billion in 2014-15.
Mango carried three million passengers last year, a 21% increase over the previous year.
Fuel costs were 14% lower but dollar-related expenditure added to operational costs.
Investment revenue of R52-million compared to R47-million the previous year meant that the bottom-line loss was less severe. — BDLive