No end to SAA’s night­mares

Mail & Guardian - - Business -

re­cent bailout — or the R1.2-bil­lion for work­ing cap­i­tal — will be spent is not clear and SAA would not say.

Ac­cord­ing to the Free Mar­ket Foun­da­tion, the money should tide SAA over un­til De­cem­ber, though this is un­likely. The air­line owes sup­pli­ers about R750-mil­lion, which will leave it with R450-mil­lion.

The foun­da­tion cal­cu­lated that, if SAA is los­ing R370-mil­lion each month, as has been widely re­ported, then, af­ter its sup­pli­ers have been paid, the rest will last lit­tle more than a month.

The trea­sury has promised that a full res­cue pack­age will be out­lined in the medium-term ad­just­ments bud­get on Oc­to­ber 25, when more money will be pro­vided for the air­line.

Mo­ga­jane has said the gov­ern­ment will re­cap­i­talise SAA with R10­bil­lion, which is ex­pected to in­clude the R2.2-bil­lion paid to SAA in July and the most re­cent R3-bil­lion bailout, with the bal­ance to be an­nounced in the medium-term bud­get.

Cost in­creases

But ques­tions re­main over what lies at the heart of SAA’s con­tin­ued fi­nan­cial cri­sis.

The Demo­cratic Al­liance’s Alf Lees said there is “no one area of con­cern” but the com­pany’s ris­ing in­ter­est bur­den, be­cause of loans it has taken out to fund these losses, is an im­por­tant fac­tor.

The air­line has again failed to ta­ble its lat­est an­nual fi­nan­cial re­sults in time but its pre­vi­ous re­port for the 2015-2016 year hints at the ex­tent of the prob­lem. SAA’s fi­nanc­ing costs in­creased by al­most 76% from the pre­vi­ous year, from R490-mil­lion in 2015 to R861-mil­lion in 2016.

The air­line’s big­gest costs were fuel and salaries, which reached R7.3bil­lion and R5.8-bil­lion re­spec­tively.

Also prob­lem­atic is pro­cure­ment and sup­ply chain man­age­ment. In a draft re­port by au­dit­ing firm EY, com­pleted in 2015, it flagged a wide range of con­cerns re­lat­ing to ma­jor pro­cure­ment con­tracts.

It high­lighted that SAA’s in­abil­ity to ne­go­ti­ate long-term fuel sup­ply con­tracts — driven in part by cum­ber­some board ap­proval pro­cesses — meant it was pay­ing more for jet fuel than it needed to.

Ac­cord­ing to Lees, the is­sue has been ag­gra­vated by SAA’s ef­forts, in the name of trans­for­ma­tion, to in­ter­pose em­pow­er­ment sup­pli­ers be­tween the air­line and fuel com­pa­nies. But this has never been fi­nalised and the air­line con­tin­ues to buy fuel on a month-to-month ba­sis.

The car­rier has been try­ing to im­ple­ment a long-term turn­around strat­egy and, in line with this, last week it an­nounced it was fur­ther ra­tio­nal­is­ing some of its in­ter­na­tional and lo­cal flights.

From Oc­to­ber 29, flights to Braz­zav­ille, Pointe-Noire and Li­bre­ville, with con­nec­tions to Cotonou and Douala, are un­der re­view, it said in a state­ment. In ad­di­tion, flights to Luanda will be re­duced from seven to four a week, and flights to Kin­shasa from five to four a week.

But one in­dus­try ex­pert pointed out that cut­ting costs by re­duc­ing flights does lit­tle for pro­duc­tiv­ity if this means there are sur­plus staff num­bers.

The air­line’s cost struc­tures are “tricky and dif­fi­cult to un­pick” and re­quire “quite in­no­va­tive think­ing” to get around them, the ex­pert said.

In to­tal, the SAA group, in­clud­ing SAA, Mango and SAA Tech­ni­cal, has 9 398 em­ploy­ees, ac­cord­ing to in­for­ma­tion it sup­plied to Par­lia­ment.

Lees said the sit­u­a­tion is go­ing to get worse now that routes have been dropped, adding that SAA had an “over com­ple­ment” of at least 3000 em­ploy­ees.

This week the air­line nar­rowly avoided a strike at SAA Tech­ni­cal by the South African Trans­port and Al­lied Work­ers’ Union (Satawu).

Ac­cord­ing to Satawu’s na­tional avi­a­tion co-or­di­na­tor, Matthew Ramosie, the union agreed to a 6% wage in­crease, which the air­line had in­creased from an orig­i­nal of­fer of 3%. The union be­lieved the in­crease was jus­ti­fied be­cause SAA Tech­ni­cal is the only busi­ness unit that has been prof­itable, ac­cord­ing to the union’s in­for­ma­tion. Satawu did not ac­cept the idea of a bloated staff com­ple­ment, he said, and or­di­nary em­ploy­ees were be­ing made the “scape­goats” for mis­man­age­ment.

Con­tro­ver­sial fig­ure

Myeni’s con­tin­ued po­si­tion at the helm re­mains con­tro­ver­sial. For her part, Myeni has said con­tin­ued crit­i­cism di­rected at her is be­cause of her ef­forts to speed up trans­for­ma­tion at SAA and to com­bat cor­rup­tion.

But the Or­gan­i­sa­tion Un­do­ing Tax Abuse and the SAA Pi­lots’ As­so­ci­a­tion have ap­plied to the courts to have her de­clared a delin­quent direc­tor.

Their case lays out some of the more con­tro­ver­sial de­ci­sions she has made, which they ar­gue have been detri­men­tal to the air­line.

Among them are her al­leged ef­forts to scup­per a care­fully ne­go­ti­ated swap trans­ac­tion with France’s Air­bus, which would ul­ti­mately have saved SAA a small for­tune. Although the deal was ul­ti­mately con­cluded, the plain­tiffs claim she mis­led Air­bus by in­form­ing it that SAA wanted to amend the terms of the deal to in­clude an African leas­ing com­pany. Nei­ther the board, nor the fi­nance min­is­ter at the time, Nh­lanhla Nene, had ap­proved the changes.

But her con­tract was nev­er­the­less ex­tended af­ter it ex­pired at the end of Au­gust. De­spite a pub­lic out­cry, the trea­sury and Par­lia­ment’s le­gal ad­vis­ers have deemed the ex­ten­sion law­ful for at least six months, or un­til SAA can hold its an­nual gen­eral meet­ing, pro­posed for Novem­ber 4.

Speak­ing on ra­dio last week, Myeni said her term is sup­posed to end in Septem­ber next year.

SAA did not re­spond to ques­tions for Myeni, but the trea­sury said Fi­nance Min­is­ter Malusi Gi­gaba “is deal­ing with the cur­rent sit­u­a­tion of the board, and an an­nounce­ment will be made soon”.

Gi­gaba said at a re­cent press brief­ing that he has com­mis­sioned an au­dit of the boards’ skills and, de­spite SAA’s de­lays to fi­nalise its fi­nan­cial re­sults, he has is­sued a di­rec­tive for the an­nual gen­eral meet­ing to be held ear­lier.

The air­line’s big­gest costs were fuel and salaries, which reached R7.3-bil­lion and R5.8-bil­lion re­spec­tively

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.