SAA counting down to relaunch
● While there is no official relaunch date yet for SAA, the airline hopes to have a schedule in place within two weeks so customers can start booking tickets.
In an interview this week, SAA interim CEO Thomas Kgokolo said that once people could book flights, a lead time of 6-8 weeks would be needed before service resumed.
While this implied a launch in mid-to-late September or early October, Kgokolo said no decision had been made and the airline was still involved in “final consultations” with the department of public enterprises (DPE) about releasing a booking schedule to the public. But the plan to open online booking by the middle of next month “should guide you on the launch-date targets”, he said.
Flight schedule imminent
“We are hoping the consultations we have had this week will get us to the point of being able to make an announcement about issuing a flight schedule in the early weeks of August.”
There have been a lot of changes in the past three or four months at SAA, with the airline exiting its 17-month business rescue process at the end of April shortly after Kgokolo was appointed.
In June, the DPE named the consortium Takatso as its preferred strategic equity partner to take a 51% interest in SAA. Takatso comprises Global Aviation — owner of the new low-cost carrier Lift — and pan-African infrastructure investor Harith General Partners. Takatso chair Tshepo Mahloele is also chair of Arena Holdings, which publishes the Sunday Times.
Takatso, which is still conducting due diligence on the transaction, intends to provide about R3bn in funding for the new SAA over three years.
Asked about SAA’s current financial standing, Kgokolo said working capital was available to restart the airline.
In April the DPE said R2bn had been earmarked as working capital for the relaunch of SAA. This was part of a total of R10.5bn in emergency funding allocated by the National Treasury to implement the airline’s business rescue.
That R10.5bn allocation includes R2.7bn for subsidiaries SAA Technical, Air Chefs and low-cost carrier Mango.
Enough money for at least a year
“Where we are, we can run with that [working capital] for about 12-15 months or so,” Kgokolo said.
“The understanding and expectation is that by that time the strategic equity partner process is finalised and we will also receive another cash injection.”
He said the decision this week by the boards of Mango and SAA that the low-cost carrier would also enter business rescue should not “significantly impact” SAA’s relaunch plans.
“Our thinking is that Mango’s business rescue process … [will] be done within a few months, so it will be a short process.”
Mango this week stopped all flights until further notice after failing to pay its debts to Air Traffic Navigation Services (ATNS).
In a statement this week, ATNS CEO Dumisani Sangweni said Mango had not kept its “account current despite numerous requests to remedy the situation”.
Mango’s finances not so sweet
He said the organisation was willing to “continue rendering services to Mango on condition that the account is paid in full and all current and future billing are paid for as and when it becomes due”.
ATNS did not disclose how much Mango owes it. Mango did not respond to a request for comment.
In a statement this week, Kgokolo said the R2.7bn in funds gazetted for SAA’s subsidiaries were “yet to be received by SAA to recapitalise the subsidiaries” and that the airline was in “constant contact with our shareholder in this regard”.
Asked for comment, DPE spokesperson Richard Mantu said the department, along with the Treasury, were “currently sorting out a financial administrative process”. He said the department supported Mango entering business rescue because this was a better option than liquidation.
Kgokolo told Business Times that SAA and Mango were still finalising who would be appointed as a business rescue practitioner and were conducting internal consultations with labour and the government. He said Mango is still part of SAA’s domestic flying plans. “What we just need to do is that during the business rescue we need to clarify what exactly that plan looks like, so that as it emerges out of business rescue it is much more clear what the role of Mango will be within the group.”
As for new flight routes for a relaunched SAA, Kgokolo said the airline will still operate domestic flights but it is “important to accept that the domestic market is overcrowded” and one of the key focus areas would be the regional market.
Airlines generally are haemorrhaging cash and struggling to survive due to the impact on global travel of the pandemic.
Regional market offers promise
“The regional market is not overcrowded and so presents opportunities,” Kgokolo said.
“I can’t speak of the specific routes at this stage because I have not published a schedule, but we will be doing regional routes based on our assessments of which routes were profitable in the past and which we believe will be profitable going forward.
“But we will operate in the domestic market because an airline operates on a network basis. Let’s say somebody flies from Nigeria to Joburg but wants to go to Cape Town when they are here.
“We want them to fly SAA to Cape Town so we want SAA, like it has done in the past, to continue transporting them.”
Kgokolo said SAA has retained 88 of the 268 pilots that it used to have. The first phase of compulsory pilot retraining was completed in the past week with the process scheduled to be completed this month.
SAA Technical and Air Chefs are also important for SAA’s operations but the plan was for them to diversify their income streams so they were not so dependent on the parent company, Kgokolo said.
Asked if he planned to throw his hat into the ring as a candidate for permanent CEO, he said he has not thought that far ahead.
“For now, the important task is to assist with the due diligence and also to assist with building a solid restart plan. Once these two things are done substantially, maybe in about three or four months, I would have an indication of what the future holds. But for now the focus is on getting the airline off the ground.”
Kgokolo, a chartered accountant who is a former nonexecutive director of ATNS and a former CFO at the Competition Commission, said the SAA job has been “very challenging”, adding that the interim executive team had been working “Mondays to Sundays”.
“I’m blessed to have capable people who have assisted with the load,” Kgokolo said.
Others on the interim team who assisted him included CFO Fikile Mhlontlo, human resources executive Mpho Letlape, commercial executive Tebogo Tsimane and executive in charge of operations, Sakhile Reiling. Tsimane this week assumes a new role in the CEO’s office, with Simon Newton-Smith in the interim commercial executive position.
Asked about stress levels in his SAA post, Kgokolo said: “I’ve had other stressful jobs but I also believe SAA matches up to some of the challenging tasks I’ve taken in the past just because it is a complex group structure and it is in a very difficult sector.
“The aviation sector without Covid is still a difficult sector and if you add Covid into the mix, it is really, really challenging.”
According to the International Civil Aviation Organisation, the impact of Covid meant that last year the aviation industry globally suffered a revenue loss of $371bn (about R5.4-trillion). The number of airline seats offered was 50% down on normal.