SAA to hire expert to steer airline towards profit-making territory

SOUTH African Airways has agreed to hire a restructuring expert to help turn around the state-owned airline and help meet conditions laid down by lenders to roll over debt, two sources familiar with the matter say.

Incoming CEO Vuyani Jarana met British industry veteran Peter Davies last month and he agreed to help try to return SAA to profit, said the sources, who asked not to be identified as the plans are private.

Davies is a former CEO of European airlines including Air Malta and Brussels Airlines and currently runs London-based consultancy Airline Management Group.

“We are finalising steps that will lead to the appointment of a chief restructuring officer,” SAA spokesman Thali Thali said.

“No announcement on the identity of the candidate can be made before we attend and resolve the outstanding issues.”

Davies did not immediately respond to a phone call and e-mail for comment on the matter.

The appointment of a strong management team is one of several conditions lenders have laid down to extend talks on loan repayments beyond Finance Minister Malusi Gig medium-term budget update this month, the sources said.

One of those was a payment of R700-million to Citigroup as part of R1.8-billion of debt due to the US bank by the end of September, which was released by the national Treasury along with funds for working capital on Friday last week.

Treasury confirmed the payment of R700-million to CitiGroup and directed further questions to SAA.

Unless the airline’s board is replaced by one that is able to salvage it, the banks will have no choice but to call up the money they are owed,

A group of South African lenders led by Nedbank – and including FirstRand, Standard Bank, Barclays Africa and Investec – are prepared to negotiate a refinancing of debt to end-March 2019, the sources say.

In his medium-term budget update, Gigaba was expected to announce proposals intended to enable SAA to break even by about that date, including details of a recapitalisation plan, they said.

Nedbank, which is leading the talks, does not provide details of its banking relationships with its clients, a spokesperson said.

SAA is one of several state-owned companies in need of urgent funding.

The carrier has not made a profit since 2011 and has been surviving off debt backed by state guarantees.

Jarana will become the company’s first permanent CEO since 2015 when he joins from Vodacom on November 1. Treasury has considered trying to sell part or all of its R12-billion stake in Telkom to help finance a bail-out.

A recent Treasury bail-out will not cover the bankrupt airline’s operating costs until the end of March next year. SAA said last week it would reduce flights to Port Elizabeth and East London as part of its turnaround plan.

The carrier would also scale back routes to Luanda in Angola and Kinshasa in the Democratic Republic of Congo.

SAA is working towards repatriating as much as $1-billion (R14billion) from Angola, Zimbabwe and Nigeria to help strengthen the balance sheet, according to the sources. — Bloomberg