SAA should curb losses by securing R1.3 billion in annual savings from dropping weaker routes and accelerating plans to retire inefficient jets, according to its interim chief.
Route changes could contribute R507 million to earnings before interest, tax, depreciation and amortisation, while restructured plane leases should save R300m, acting chief executive Nico Bezuidenhout said earlier this week.
“It’s challenging,” Bezuidenhout said, disclosing that losses worsened in the fiscal year through March due to a weaker rand, the wider impact of the Ebola crisis and the failure to implement a savings strategy unveiled last year.
Bezuidenhout has been running the airline since November 7, when he moved over from its discount unit Mango after chairman Dudu Myeni ousted chief executive Monwabisi Kalawe. While the blueprint for a 90-day recovery plan for SAA was handed to the Treasury and Department of Public Enterprises on November 10.
Regardless of longer-term plans to upgrade the wide-body fleet with new planes such as the Airbus Group A350 or Boeing 787, SAA needs to cease flying A340-600s, which are fuel-hungry and leased on terms “as if they are in high demand”, Bezuidenhout said. The four-engine jetliners should be replaced with more efficient two-engine models, also on a lease basis.
That might point to interest in used Boeing 777-300ERs, which would offer a similar combination of seats and range to the A340s, or possibly the A330-200, which features in the SAA fleet, though the model carries fewer passengers.
Kalawe, described as being on a leave of absence, said a year ago that he was seeking to upgrade the engines of the nine A340-600s to cut fuel costs while deciding between new long-haul models, which he envisaged being delivered from 2017.
Some R250m of savings could be secured through the renegotiation of services contracts, while other measures might deliver a R100m revenue boost, according to Bezuidenhout. He didn’t say how the balance of the R1.3bn sum targeted would be achieved.
South Africa would seek potential buyers for an equity stake in SAA as part of a recovery plan, Public Enterprises Minister Lynne Brown said on October 23. The carrier was surviving off state-guaranteed loans because its applications for grants were turned down.
SAA said on Monday that it stood by the appointment of Bezuidenhout as acting chief executive, citing his “proven experience, capability and track record”, after claims that he had misrepresented his qualifications. – Bloomberg