File photo: Nicholas Rama (ANA).
File photo: Nicholas Rama (ANA).

SA Express to replace local flight routes with destinations on the African continent

By Banele Ginindza Time of article published Sep 6, 2019

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JOHANNESBURG - State-owned medium- to short-distance carrier SA Express has dumped local routes to focus on continental destinations as stiff competition in the market and crippling debt saw its flights grounded last week.

The group said it had decided to leave the local routes on stiff competition from low-cost airlines.

It said it had asked the government for a R300million short-term financial boost to run its operations until it implemented its turnaround strategy.

It said the strategy, which has already cost it more than R1.2billion in historical debt, would include the downsizing on its staff complement.

“The R1.2bn helped to resolve solvency issues, but not operational capital, what we are expecting as shareholder support will be sufficient for the short-term while we implement our strategy,” interim chief executive Siza Mzimela said.

SA Express has struggled to stay afloat as it has depleted its working capital with most lenders reluctant to give it a loan on the grounds of its weak balance sheet.

The government has also shown reluctance in extending further guarantees.

Last year the South African Civil Aviation Authority suspended its certificates of airworthiness for nine of the 21 aircraft operated by the airline, with the watchdog citing non-compliance in relation to 17 specific findings.

Yesterday, a full complement of executives told the media that the airline had a clean bill of health after negotiating terms with key creditors, including Airports Company South Africa, which is owed more than R71m.

It said what it needed now was a short-term cash injection for operational expenses.

Mzimela conceded that SA Express was ready to be integrated into the structure proposed by the departments of Enterprises and Treasury as part of a turnaround plan for transport state-owned enterprises.

“There had been some level of arrangements made, our key focus is to ensure not to add to that legacy debt,” Mzimela said. “We cannot speak on behalf of the major shareholder, but it is common knowledge where the government has indicated its intention to integrate all state aviation assets, from our perspective, we will work in support of that direction.”

Mzimela said SA Express said the focus was now on operating in secondary markets such as Lubumbashi in the Democratic Republic of Congo and other continental routes.

She said the airline had been squeezed out of the local primary markets principally between Johannesburg to Cape Town, Bloemfontein, George and Durban.

Mzimela said SA Express was now finalising the process of rightsizing its operations.

“The grounding (last week) has allowed us to identify skills and roles that needed to be reviewed,” she said.

Mzimela, however, refuted that the grounding was as a result of financial liquidity challenges facing the airline.

“For the period that we were grounded, the historical debt situation got worse, because we still had fixed costs, but we were not generating any revenue,” Mzimela said. “What we are asking for, what we are hoping for from the stakeholder, in terms on what we would have based our projections on, was a R300m facility.”


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