A South African Airways plane prepares to land at OR Tambo International Airport near Johannesburg. File picture: Simphiwe Mbokazi

SAA, the unprofitable state-owned airline trying to renew its fleet, will probably require private funding of R50 billion to stay afloat, according to the government.

“We are looking at guarantees for funding for SAA,” Public Enterprises Minister Lynne Brown said yesterday. “They have to meet conditions of the open market.” The funds would come from private investors as loans or bonds and be backed by the Treasury.

SAA had hired KPMG to advise on the acquisition of about 25 aircraft to replace older models and reduce operating costs, chief executive Monwabisi Kalawe said on Wednesday. It was battling with an ageing long-haul fleet and would not break even until financial year 2016/17, he said.

The airline had accumulated total losses of about R16bn by March 2013. While the airline is surviving off loans backed by the state, it does not have outstanding bond debt.

“SAA has never been to the bond market over the past decade at least,” said Rashaad Tayob, a portfolio manager at Abax Investments. “There’ll be a market for the airline’s debt if there is a state guarantee.”

Its operating loss for the 12 months through March last year narrowed to R991 million from R1.25bn the previous year. Revenue rose about 14 percent to R27.1bn, its annual report showed.

“It’s been loss making for the past decade, being mismanaged for a number of years in an industry that is quite tough,” Tayob said.

Kalawe is SAA’s fourth chief since October 2012. The former managing director of Compass Group’s southern African unit took over in April last year following resignations or suspensions of former executives.

“I had a barrage of issues around SAA; we are trying to get the governance issues out of the way,” said Brown, who took the post after the May national election. – Bloomberg