SAA decisions do not fly

SAA in business rescue has returned all its leased aircraft to the lessors in an aviation environment where its more capable global peers (also in distress) are using this one-off global opportunity to renegotiate lease terms at rates up to 50% cheaper than pre-Covid. So why not SAA?

At the date of writing, SAA is still technically in business rescue, notwithstanding that all so-called conditions of the plan were met two weeks ago. Notwithstanding this, the public enterprises department and its army of nondescript advisers invited Airbus, Embraer and Mitsubishi to provide proposals to acquire a brand new fleet of aircraft for delivery starting in October, which is nigh on impossible.

This is highly irregular, given that SAA is still in business rescue and that you typically expect SAA to invite parties to submit proposals. Let’s consider the cost. The business rescue plan provides for 26 aircraft: seven wide body, nine narrow body and 10 small narrow body. At heavily discounted prices, you can expect to pay about $200m for widebody, $60m for narrow-body and $40m for small narrow-body aircraft. But we know our government is hardly ever interested in discounted prices — quite the opposite.

Giving it the benefit of doubt and allowing for a generous rand-dollar exchange rate of R17, SA taxpayers are facing a bill of about R40bn for this procurement folly. So the cost of rescuing our national airline continues to mount — R16bn to repay the banks, R10bn for the rescue plan, R6bn in losses for the first three years, R1bn to recapitalise perpetually bankrupt subsidiary Mango, another R1bn for SAA Technical, and then R40bn for a fleet of brand-new aircraft. That’ sa princely R74bn before we even start to count the inevitable trading losses after the so-called business rescue.

Is this another political party fund-raising exercise? Can Pravin Gordhan really be this callously vain at taxpayers’ expense? Commercial banks must be salivating at another round of reckless lending, advisers in tow. Don’t be surprised if the deal has already been done at a diplomatic level. SAA has a history of French connections.

John Fairwell Via e-mail