The troubled national airline, SAA, would implement its ninth turnaround strategy in 13 years, but this time Public Enterprises Minister Malusi Gigaba told MPs the state-owned entity would take a new runway, which would propel it to success.
This would include “leveraging” off its own balance sheet, he promised yesterday.
One of the key elements of the plan is to merge SAA with its subsidiaries, SA Express and the low-cost airline Mango. But journalists were told this was a “complex” legal process and the government would be able to tell only by early 2014 whether this was feasible.
Gigaba told MPs on the National Assembly’s public enterprises committee that the latest plan – the Long-Term Turnaround Strategy – would allow the entity to “sweat its assets… both people and structure… and build prerequisite capabilities, optimise operational efficiencies of strategic routes, prioritise fleet renewal and strategic fleet acquisitions that will grow our revenues”.
It also included cost-saving measures “in a bid to recover the balance sheet”.
Much of the input into the new strategy is drawn from advice commissioned by the Department of Public Enterprises from Mott MacDonald and Spectrum Capital.
This had fed into the work carried out by the task team that was made up of SAA, SA Express and the Public Enterprises Department under the leadership of an SAA board sub-committee, he reported.
Monwabisi Kalawe, the fourth chief executive of SAA in six months, was appointed in April this year. He was described at the time as the “custodian of the turnaround strategy”.
Kalawe spoke about the blueprint in glowing terms. He said it was the most comprehensive in the airline’s history.
But he was thin on details on routes (other than saying there would be a focus on the African market), recapitalisation and the merging of SAA with SA Express and low-cost airline Mango. It was argued that a single holding company would slash running costs.
Natasha Michael, the DA’s public enterprises spokeswoman, said the plan did not instil confidence that the national carrier would be stabilised.
“It appears that SAA will continue flying around in circles with no end in sight,” she added.
It was not clear how much the strategy would cost, whether there would be any job losses and whether the airline planned to cut routes – or to introduce new ones.
It was not even clear that the three airlines would, indeed, be merging.
She pointed out that the previous eight turnaround strategies had cost an estimated R16 billion, yet the airline continued to yield lower profits than its global competitors.
“SAA should be privatised in order to ease the burden on the public purse. South Africa has far more critical service delivery concerns than pouring cash into sustaining a going concern,” she said.
SAA had reported a loss of R1.25bn last year and Kalawe, who came to the airline from food company Compass Group’s southern African unit, acknowledged that turning the entity around would be a challenge given the “headwinds out there”.
Gigaba said “capitalisation requirements” were being reviewed “further” and developed together with the National Treasury.
“SAA needs to focus on cost containment and improvement in the company’s debt-to-equity ratio,” he said.
Last year the entity asked for a R6bn guarantee and by October it was awarded a R5bn guarantee for a period of two years. That kicked in from September 1, 2012 and allowed the state-owned entity to borrow from financial markets.