Staff at broke SAA may not get paid
SOUTH African Airways (SAA) has run out of cash and is effectively bankrupt, with fears that it may not be able to pay salaries.
According to a cash-flow analysis provided by the airline to MPs on Wednesday, the stateowned airline went into a negative cash position in July when it had a net cash outflow of R568million.
It projects a further deterioration in the months ahead with net cash outflows of R936million forecast for August and R918-million in September. An improvement to a negative cashflow of R134-million is projected for October on the assumption that the airline gets financing and government support of R792-million.
DA deputy finance spokesman Alf Lees pointed out the cash-flow projections for September did not include the R6.8-billion in loans which SAA is due to repay to its lenders by the end of that month and which it hoped to renegotiate. Proper accounting principles required this to be included in the cash-flow analysis, Lees said.
According to documents provided to members of parliament’s finance committee before a presentation by SAA today, the airline, which relies on a R19-billion state guarantee, needs a capital injection of R13-billion over three years.
It is not clear whether the R13-billion includes the R2.2-billion that SAA had recently received from the Treasury in order to repay a loan to Standard Chartered Bank when the bank refused to extend it.
The Treasury is considering the sale of state assets to fund the airline’s recapitalisation.
SAA chairwoman Dudu Myeni will tell the committee that SAA posted a year-on-year loss of R1.46-billion in the first quarter of 2017-18, R71-million worse than the matching period last year.
SAA remains without a CEO, with no appointment in sight despite Finance Minister Malusi Gigaba saying he would finalise the CEO appointment by July.
The Treasury said on Tuesday that it had finalised the process of recruiting a CEO and had forwarded its recommendation to the cabinet for consideration.
But this has raised questions about the effectiveness of the new board in halting the airline’s downward slide.
Gigaba has given the assurance that there would be measures to strengthen the board and appoint a new chairperson in August.
SAA’s quarterly results show that operating costs of R7.7-billion have wiped out all the revenue of R7-billion even before the R367million in quarterly finance costs were taken into account.
This is a clear sign of the inefficiencies and operational difficulties that the airline will have to overcome if it is to become profitable.
Revenue in the quarter was lower than expected and this had a negative effect on the bottom line. The first-quarter results, which were below target, mean that SAA might fall short of its projected net loss of R853-million for 2017-18, which is nevertheless an improvement on the projected loss of R4.5-billion for 2016-17.
The struggling airline’s “aggressive” five-year corporate plan, which has been refined with the help of independent aviation experts, assumes a recapitalisation; the agreement by lenders to extend maturing loans for a minimum of three years; the retirement of five wide-body aircraft; and that there will be no exit for any of the narrow-body aircraft.
The first two A340-60 wide-body aircraft will be retired in August and in October.
SAA says the success of the corporate plan depends on the assumptions being realised. It forecasts that its corporate plan will generate additional revenue of about R13.6-billion over five years through changes to its route network and initiatives to enhance revenue.
Myeni will be questioned by MPs about her attendance at board meetings. There have been media reports about her failure to do so. — BDLive