SAA funding crisis grows by R2-billion

THE National Treasury’s R4.7-billion government guarantee was more than R2-billon rand short of SAA’s funding requirements, an internal SAA memo has shown.

As the embattled airline’s new board said on Friday that SAA needed a cash injection over and above the latest goingconcern guarantee, Business Times has established that SAA’s treasury said in August that its funding gap had increased from R4.7-billion to R7-billion.

“As a result of the additional requirements to refinance the Standard Bank loan of R1.5-billion and additional working capital of R1.5-billion, the funding gap for the 2016-17 financial year has increased from R4.7-billion to R7-billion,” said the report, dated August 23.

SAA’s finances have been in the spotlight lately after the airline reported R5.62-billion losses for the financial year that ended in 2015 and a R1.5-billion loss in the past financial year. The airline shipped off its completed annual financial statements on Friday.

It was involved in a prolonged standoff with its shareholder, the Treasury, which refused to sign off on a crucial going-concern government guarantee over governance concerns. Without it, SAA — which currently has more than R19-billion in guarantees — would be considered insolvent.

This week, two weeks after getting a R4.7-billion guarantee from the Treasury, SAA’s new board was quoted as saying it also required a cash injection.

BDlive quoted SAA’s new board as saying the airline still required an injection to strengthen its balance sheet. “SAA remains undercapitalised. Four consecutive years of operating losses have further eroded the capital base. The lack of capital has hindered the directors’ ability to invest in newer and more efficient aircraft, and left the company less able to cope with the significant volatility in foreign exchange rates and the price of jet fuel,” a report from the new directors said. The new board was also quoted as saying the “impact of the cost of increased borrowings on future profitability was significant”.

At end March 2015, SAA had total liabilities of R24-billion and total assets of R14-billion, with only R1.3-billion in cash and a bank overdraft of R1.4-billion. Its accumulated loss amounted to R24billion. SAA did not respond at the time of going to press.

Treasury spokeswoman Yolisa Tyantsi said the department had not been formally approached by SAA about the matter.