A persistent beggar that needs to learn to fly by itself
When I served on the SAA board four years ago, we were tasked with reviewing previous attempted turnaround strategies at the company and trying to formulate one that would work.
It was a mammoth task, for which we were only allocated three months.
The logic of the then minister of public enterprises was that we were not starting from scratch and that the country could not wait another day to be told how the neverending bleeding at the airline could be stanched.
So we got on with it, and with the assistance of leading aviation experts from the Oliver Wyman consulting group, we managed to review the previous strategies developed over the decades by successive CEOs and boards.
We learnt what had informed the decision to create Mango. The shift to lowcost carriers necessitated the move, and now all South Africans can, with the benefit of hindsight, see the value of the smaller, more nimble carrier as part of the SAA stable.
We also learnt how profitable SAA was in its domestic and rest-of-Africa markets, and that the main reason for its woes was its long-haul routes.
The debate then centred on which we keep and which we cull, and how do you turn a business around by shrinking it — surely that is counterintuitive?
Well, here we are in 2018 and even after bringing in a world-class manager in CEO Vuyani Jarana, and a new executive committee, the issues haven’t changed.
This week Jarana told the nation that following the R10-billion that the government had to inject as hard cash into SAA just seven months ago, he is going to need another R5-billion to keep the wolves at bay.
To make matters worse, this injection will only cover interest payments for historic debt and working capital requirements for the next five months. In layman’s terms, that means that the money will essentially cover the gap between revenue and expenses for the next few months and give those who lent us money some interest to ensure they don’t ask for their monies back, because frankly we don’t have it.
Is it not time that South Africa did a brutally honest cost-benefit analysis on SAA?
Not one charged by political ideology only. Not a debate limited to privatisation versus nationalisation. Not one that seeks to attach an emotional value to the feeling we all get when we hear that Vusi Mahlasela music as we board in New York.
No. A real and brutal analysis of what it costs to keep the airline wholly owned by the government, versus the benefits that accrue to South Africa.
There is no doubt that the airline generates developmental dividends for the country, and we know that all governments have to consider the national agenda in such decisions.
However, everything comes at a cost and we do not have an endless supply of money.
At some point, especially with limited resources, we need to prioritise, or as young people say, “we need to pick a struggle”.
We have just spent R10-billion on SAA.
Is it not time that SA did a brutally honest cost-benefit analysis on SAA?
We did that seven months ago. It is back for another R5-billion. What will we sell this time around? More Telkom shares? To fund SAA for another seven months? What happens when the airline asks again — because we all know it will?
I love SAA and I still believe that the airline can be rescued — but not in its current construct.
The industry is increasingly competitive with even tighter margins. Aviation is a balance-sheet game — in other words, you need a very big one to compete, and that does not exist at SAA.
Until it is adequately capitalised and operates on commercial terms, we can expect the begging bowl to come.