CAPE TOWN - South African Airways chief executive Vuyani Jarana believes that the embattled airline is making steady progress in order to become profitable again.
Jarana said in an interview that the national carrier could see a profit in the next three years, despite a number of challenges. It is the hope that SAA will break even or see some profit by the end of the 2021 financial year, Jarana said.
“I’m still quite comfortable about the execution of the plan,’’ Jarana said last week. In March this year, SAA reported a loss of R5.7 billion.
In reality, this was more than double of what the company budgeted for and as such was given a massive bailout from government, in order to avoid defaulting on a loan by Citigroup.
The sharp spike in the fuel price has been a major concern for SAA. Jarana said that the company is looking at how its competitors deal with the fuel issue and increasing oil prices. Moreover, the chief executive said that SAA has in the past used a hedging policy but this has not been aggressive.
SAA is reportedly considering selling its catering unit, Air Chefs, and also outsourcing or selling SAA Cargo, according to City Press. Jarana has said though that no definite decision has been made as yet.
“On revenue, we’re quite happy, but other aspects are more difficult,” he said.
The DA said late last week that selling of assets will not save SAA. The opposition said it was not surprised by media reports that SAA was contemplating selling off assets as a result of the mounting debt the airline faces.
The reports further indicate that SAA will lose R6 billion in the 2018/19 financial year meaning that SAA will lose R822 million more than the already massive loss of more than R5 billion projected in the SAA Corporate Plan.
In the latest corporate plan, SAA is set to receive government bailouts of R13 billion over the next two years, however, the additional losses will mean that the taxpayer will have to pay more, at least R14 billion in total.
The DA has maintained that SAA has been and is bankrupt and that the airline cannot trade its way out of debt. Despite the government guarantees of R19,1 billion that are available to SAA, commercial banks are apparently unwilling to lend more to SAA.
The “new” board and executives of SAA are unable to implement a robust plan to cut the bloated costs, root out rampant corruption and grow sales and on top of this meet debt servicing and repayment obligations, the statement said.
Last month, the Ministers of Finance and Public Enterprises issued a joint announcement that SAA will be transferred to Public Enterprises. This move, as the DA warned, has not made a difference to the fortunes of SAA, DA spokesman Alf Lees said
Now more than ever before there is clearly a need to place SAA into business rescue, Leeds said. Lees said that government needed to appoint a business rescue practitioner who has experience in the airline industry and who will make the hard financial decisions to stop the losses.
The government must also allow SAA to recover under business rescue and be privatised, failing which to let SAA go to the wall and be liquidated.
- BUSINESS REPORT ONLINE