Seems SAX has run out of appeal
Financial losses continue and subsidiary airline will also be merged
THE FINANCIAL woes of the whollyowned SAA subsidiary South African Express (SAX) came to the fore this week when the small airline posted a loss of R726 million during the financial year 2016.
A report by SAX directors said the losses continued even after it had made some cost-cutting measures.
“The company was granted an extension on the existing guarantee of R539m relating to covenant breaches and working capital as well as an additional guarantee of R567m for the future working capital and asset-based facilities,” said the report.
It said the guarantee was reduced by R100m in March last year and there were conditions attached to the guarantee.
The guarantee was further reduced by R58m in February this year.
“In March 2017 approval was obtained to utilise the R121m perpetual guarantee. The amortisation period was also extended from five to seven years,” said the report.
SAX said it would continue to operate as a going concern with a perpetual guarantee.
The gloomy SAX picture comes as SAA face more pressure from lenders with Citibank on Friday announcing that it would recall its R1.8 billion loan with the national airline.
A few weeks ago, Standard Chartered Bank refused to extend its R2.2bn loan and demanded repayment, sending the National Treasury into a scramble to pay the loan in order to save the national carrier.
SAA has a total loan book of R6.78bn that expires at the end of September.
The airline told Parliament this week it was hoping the loans would be extended as DA MP Alf Lees claimed there was a cabinet memorandum that contained a secret proposal by the government to sell its Telkom stake in order to raise R10bn to fund SAA.
On Friday, Finance Minister Malusi Gigaba confirmed the government was exploring options to establish a proper capital structure for the airline.
Gigaba told the chief executive officers’ initiative steering committee that the Na- tional Treasury had put together several proposals which had been given to cabinet for consideration.
He said the proposal had not been finalised and cautioned against “any hysteria created by our considering of various options. At the present moment what is a fact is that there is a R10bn recapitalisation that is required for South African Airways but the model of that recapitalisation is not yet finalised.”
The financial woes of SAA and SAX strengthened the resolve to merge the entities.
SAX said it had implemented some cost-cutting measures and would continue to do so for the foreseeable future.
The company said it still had access to cash and would continue to operate.
“The company has positive equity indicating the company is solvent. Positive equity is driven by the raising of long-term funding of R121m, profits for the year and the reduction of capital expenditure,” said the report.
SAX said its ability to continue as a going concern was dependent on, among other issues, directors finding cash for the ongoing operations.
This week in Parliament Deputy President Cyril Ramaphosa said the government would go ahead with the merger of SAA with SAX and Mango in order to save the state money and to strengthen the balance sheets of the airlines.
Ramaphosa did not, however, give any indication of how soon the merger would be completed.
Passengers boarding an SA Express aircraft at the OR Tambo International Airport.