Another bailout for SAA
INSOLVENT: NATIONAL CARRIER STILL INCURRING ANNUAL LOSSES
Government has turnaround strategy Gordhan feels will make difference.
South African Airways remains technically insolvent and will receive a further bailout from the government in the coming financial year, according to the annual budget unveiled by Finance Minister Pravin Gordhan yesterday.
“SAA pared its losses from R5.6 billion in 2014-15 to R1.5 billion in 2015-16. The improvements resulted mainly from lower fuel prices and lower asset impairments. However, the carrier remains technically insolvent,” Gordhan said.
He recalled that the airline’s going concern status depended on state guarantees totalling R19.1 billion and said its liquidity problems were expected to persist over the medium term.
Government would increase its financial assistance to SAA, but in a way that does not swell the country’s deficit, forecast at 3.1% of GDP in the year ahead.
“During 2017-18, government will provide some financial support to SAA in a manner that does not increase the budget deficit.”
In September, Gordhan extended another government guarantee for R5 billion to SAA to enable it to have going concern status and be able to file overdue financial results.
He said the further financial support pledged in the budget would strengthen the ability of the company’s new board to implement a turnaround strategy that would put it on the path to financial sustainability.
The minister reiterated that merging SAA with South African Express and finding it a strategic equity partner remained part of government’s plans.
He said the SAA board, headed by the controversial Dudu Myeni, was completing the process of finding a new chief executive officer and new chief financial officer. “The process will be submitted for government’s consideration and approval.”
Gordhan told reporters at a media briefing a few hours before he tabled the budget that Myeni had skipped a recent and constructive briefing National Treasury held with the rest of the new SAA board.
He added: “The new board members have got good grip on the situation … If they do the right thing and find the right CEO and CFO in the coming months, the prospects are good for SAA to achieve a successful turnaround.”
The minister said he could not yet put a figure on the further equity injection the airline would need from government.
“At this stage, we cannot tell you where the money will come from but that is work in progress.”
Government’s troubled stateowned companies, of which SAA is considered one of the most problematic, last year generated a combined return on equity from shareholder funds of 0.8%. – ANA