SAA is running out of runway
NATIONAL carrier SAA needs another significant bailout to keep its operations ticking over.
New chief executive Vuyani Jarana has a thankless task ahead of him and, despite his assurances that his proposed turnaround strategy, one almost certain to include a degree of private shareholding, holds promise, he and the airline are several more years from breaking even – 2021 to be precise
Barring a hefty injection of private capital, one has to wonder how many more bailouts are in the pipeline?
The latest plea is for another R5-billion, half of the massive capital boost it received from the government last year.
With this money, the airline needs to settle interest payments, with a chunky debt pile of R9.2-billion maturing next year, just to add to the challenges.
In addition, the taxpayer-sponsored handout would cover salaries and suppliers until September.
Such are its working capital deficiencies that SAA is living from hand-to-mouth at the moment.
You can bet any interruption to the payment of salaries would be disastrous.
Flights instantly would be grounded.
Jarana revealed this parlous state of affairs to the standing committee on public accounts on Tuesday.
While his frank appraisal of the company was refreshing, if alarming, it showed just how urgent the crisis has become.
Furthermore, its revival depends on further funding over and above what it needs now, and may need in the medium term, to keep the lights on and the planes in the air.
In other words, SAA cannot finance its own turnaround, key to which will be a refreshed fleet of modern aircraft that are cheaper to run.
It’s unfathomable to the ordinary person where this sort of money will come from. The commitments are staggering, while its balance sheet is a wreck.
At some point, the government will have to think very hard about turning the taps off. There is simply too much risk exposure with SAA.
Besides, there are other financial cliffhangers among our stable of state-owned enterprises needing rescue.
SAA’s future is wildly uncertain. Clearly, though, its runway of options is quickly running out.