Financial Mail



hen finance minister Nhlanhla Nene presents the budget in February, he will have to tell us how much more of our money he will give to the state-owned disaster that is SA Airways.

The company has been a high flying cash drain since it was unbundled (for that very same reason) from Transnet a few years ago and its core business continues to drill an ever-growing hole into the taxpayer’s pocket.

Never having paid a dividend in the past 21 years to its sole shareholde­r, the SA government, SAA has instead been a persistent albatross around the fiscus’s neck, with its permanentl­y outstretch­ed begging bowl for one “equity injection” after the other.

Up to now government has been generous, motivated by the fact that the national carrier was a “strategic asset” and that the latest guarantee was supposedly funding the newest “turnaround” strategy.

The current action plan is the 10th time in the past 17 years that the airline has tried to reverse its misfortune. The result has always been the same: more losses and more looting, followed by a government bailout.

This time around SAA has not even been able to publish its financial records for the year to March 2014. That’s because it is insolvent, having reported a R1,17bn loss the previous year, which means it is technicall­y not a “going concern”.

The loss is rumoured to have ballooned to over R1,5bn in the past year and, with a R5bn state guarantee already in place, it now wants more.

The company recently reported that it had finally managed to convince its auditors that it was in fact a going concern, and would therefore publish its financial accounts on January 30.

“We have adequately satisfied [our] auditors that our going-concern status has been reinstated,” acting CE Nico Bezuidenho­ut told

The question is what has changed since October when it asked parliament for a postponeme­nt on tabling its results? Nene still has not allocated any more money to SAA. It still has not sold a single asset to dig itself out of its financial hellhole.

Instead, what the company has managed to achieve is to lose more money, even while the price of oil has halved since June. SAA CFO Wolf Meyer says the company is losing R392m on the 40% of fuel requiremen­ts that it hedged. But that’s balanced out by the R300m gain on the rest of the fuel bill. The R90m net loss will add to the R8bn-R10bn of hedging losses it has racked up since 2008.

Compare that with the privately owned Comair, which has not only made a profit in each of the 69 years of its existence, but has paid an annual dividend to its investors since 1998. Comair CE Erik Venter tells

that each US$10 drop in the oil price equates to a saving of R50m for the airline. That would lower costs by about 3% when currency movements are considered. And that in turn would mean a 50% increase in profit in the year to June. But the biggest drop in the fuel price occurred in the six months to December, and Comair investors should be flying high come March when the interims are published.

SAA, on the other hand, cannot make a profit even at $45/bbl of oil, and will run out of cash by September if the state doesn’t step in. But what is the alternativ­e?

Remove the politician­s from the scene and replace them with profession­al business managers. Cut SAA from the tax bill by listing 51% of the stock on the JSE, just like Telkom did not too long ago. Investors hungry for returns will immediatel­y cut off the politicall­y sensitive but unprofitab­le routes to Sao Paulo, Beijing and other capitals. That would be followed by the sacking of a good half of SAA’s almost 12 000 employees. Then the cash would start flowing the correct way, into the nation’s tax coffers and into investors’ pockets.

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