Further R2.2bn bailout needed to save SAA
THE LATEST debacle on SAA has pushed the government envelope once more forcing it to sell some of its assets to fund the R2.2 billion bailout to repay the loan from Standard Chartered Bank.
This is not the end of the financial woes of the national carrier as it is expecting a massive loss of more than R1bn for the last financial year.
The huge losses have left a hole in the balance sheet of SAA, which is battling to stay afloat in a competitive sector where small players have seen dwindling profits.
The National Treasury is still looking at the assets it is going to sell to plug the gap on the R2.2bn bailout.
The government does not want to fund the bailout from the Budget.
The national carrier has also already taken up guarantees of almost R20bn in the past few years and used most of the guarantees. However, the latest R2.2bn bailout has left parties in Parliament up in arms warning that the government cannot continue to be held hostage by SAA.
Parties want SAA to stop bleeding financially as it impacts on its ability to function and on the government.
The national carrier has lost more than R6.5bn in the past three years, with more projected losses in the past financial year.
When it came to Parliament with cap in hand MPs demanded improved financial performance and a strong balance sheet.
But instability in the airline raised questions with MPs saying when they report in September they must provide leadership.
SAA has already said it would suffer a loss of more than R1bn in the past financial year.
Its results will be tabled in the national legislature in due course, and they will give a clear picture of the state of the finances of the airline.
The National Treasury is expected to announce details of the sale of SAA’s assets in the next few months or even in October during the Medium Budget Policy Statement.
SAA is also in the process of being merged with Mango and SA Express (Sax) to rein in the losses and improve financial performance.
In his State of the Nation Address in 2015 President Jacob Zuma said the merger of SAA with Sax and Mango would strengthen its balance sheet.
In its results SAA has said high costs of fuel and tough competitive environment have also impacted on their financials.
SAA has had leadership instability over the last few years, with a high turnover of chief executives and the board. The current board was appointed only late last year. There has been no permanent chief executive since the departure of Monwabisi Kalawe two years ago.
SAA is one of the few stateowned entities (SOEs) that has been embroiled in allegations of wrongdoing and infighting.
The government has since 2015 been calling for better managed and financially sustainable SOEs.
Former Finance Minister Pravin Gordhan warned two years ago that the state has pumped R467bn in guarantees to SOEs and that this was not sustainable.
SAA is one of the entities that got most of the guarantees.
The logo of South African Airways sits on the tailfin of an Airbus Group NV A340-600 aircraft. SAA has been receiving the lion’s share of government bailouts totalling R467bn to state-owned enterprises.