Guarantees not a bailout, says SAA

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IOL pic mar5 saa plane generic Independent Newspapers A South African Airways plane prepares to land at OR Tambo International Airport near Johannesburg. File picture: Simphiwe Mbokazi

Johannesburg - SAA has downplayed the role of the R7.9 billion in guarantees provided by the government over the past five years in helping to keep the airline afloat.

The national carrier told the portfolio committee on public enterprises yesterday that it had not received any fiscal support since 2007, and the guarantees it had received from the Treasury had merely enabled it to source funding at less expensive rates.

“It’s not the government just giving us the money. We are just getting a loan, which we need to repay ourselves,” SAA chief financial officer Wolf Meyer told MPs.

Meyer said the airline last received financial assistance from the government in 2007 when the Treasury gave SAA over R8bn to restore its capital base after hedging losses.

He said the view that taxpayers were bailing out SAA was misguided, as the airline had never turned to the government to pay any of its debts using the guarantees provided to it.

The issue of government bailouts given to SAA in the form of guarantees has unnerved Parliament and the public, and remained a subject of debate in recent years.

The state’s guarantees to SAA since 2007 include a R1.6bn “going concern” guarantee, which it received in September 2009; a R1.3bn sub-ordinated loan in 2007, which became a solvency guarantee; and a R5bn guarantee given in 2012, which was extended this year.

According to figures presented by rival Comair in its court documents to challenge the latter guarantee, the government also provided funding of R1.5bn to SAA to retire the airline’s Boeing 747-400 fleet, along with a labour restructuring grant of R653 million in March 2008.

Guarantees are given by the government to state-owned enterprises as surety in the event that the companies fail to repay their debts.

Meyer said the guarantees became handy when raising funding for the airline’s capital expenditure programmes.

“Because we don’t have an equity base, when we go to funders – the providers of capital money – they look at our balance sheet and say we can’t give you anything, you need to get a guarantee,” Meyer said.

The airline said it needed an equity base to solve its financial woes and in 2012 the Department of Public Enterprises proposed a recapitalisation package of up to R6bn.

SAA needs to buy a fleet of 30 wide-bodied planes for its international routes and pay for 20 Airbus A320 narrow-body jets, which were ordered back in the 2012/13 financial year, but it does not have funds to do so.

“We have to understand SAA does not have a balance sheet. SAA cannot take on new debt levels because we don’t have a capital base,” Meyer said.

For the A320 planes, the first two of which were delivered last year, SAA will now have to pay more than their market value, as its contract with Airbus has escalation clauses. For the wide-bodied planes, it has two options: to lease the fuel-efficient new generation fleet or receive a recapitalisation.

Chief executive Monwabisi Kalawe said that when the airline was unbundled from Transnet in 1999, it was left without any equity base.

Although the Department of Public Enterprises and the Treasury began discussions about recapitalising SAA last year, Tshediso Matona, the director-general of Public Enterprises, said they still had not reached a resolution. However, there was a consensus that as a strategic asset, SAA deserved government support.

“There’s perhaps even renewed support within the government for the airline… We recognise that the financial sustainability of the airline cannot be the sole responsibility of the airline. Even privately owned airlines rely on their shareholders,” he said. - Business Report



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