Companies / 13 November 2019, 08:00am / Siphelele Dludla
JOHANNESBURG – South African Airways (SAA) on Tuesday stuck to its guns on restructuring, charging that the process, which would include culling more than 900 jobs, would save it about R700 million a year.
SAA interim chief financial officer Deon Fredericks said the airline’s labour and fuel expenses needed to be reduced, because they were unsustainable.
Fredericks said that SAA increased its fares by 12 percent between January and May last year compared with this year, against a 2 percent increase in passenger numbers.
He said labour costs amounted to 24 percent of turnover, while fuel added a further 27 percent.
“So, more than 50 percent of costs are in those two items. And with fuel, we cannot do much about it, because it is dependent on the fuel price. So we need to look at all the other areas to make sure we remain competitive,” Fredericks said.
“If, through the process, we don’t arrive at an acceptable number, then we need to look at other interventions and what can we do in consultation with the unions to make sure the process succeeds. The company is very sick, and it’s like a patient in the hospital. You need now to nurse the patient back to health with high care.”
On Monday, the cash-strapped airline started a consultation process with all of its 5 146 employees to embark on a restructuring process that may lead to about 944 job losses.
The scope of the restructuring encompasses all of SAA’s divisions and departments, but excludes the subsidiaries, SAA Technical, Mango Airlines and SAA Air Chefs.
SAA said it hoped to finalise the restructuring process by the end of March next year.
The national carrier has failed to submit its audited financial statements for two successive financial years.
It posted a loss of R5.67 billion for the year to the end of March 2017.
The airline has had to contend with numerous challenges in the past few years, including funding, inability to borrow indefinitely without repaying debt, a volatile and fluctuating fuel price and currency volatility to operating cost, an ageing fleet that is expensive to maintain, and aggressive international and regional competition for revenue stimulation and network optimisation.
In September, the government issued a R5.5bn bailout to cover SAA’s operational costs.
Fredericks said he understood criticism that SAA should focus on recouping money stolen through corruption, and that retrenching workers would not necessarily make it financially viable overnight.
“There are various processes and investigations that are currently on the go, and I believe there is probably more. And we are dependent on the Hawks and the SIU to assist us.”
Fredericks said the company had to start saving money somewhere.
“As for any additional costs, the state has actually now said if it doesn’t keep the aircraft in the air, and it isn’t a cost for regulatory compliance, we don’t want to incur it.”
He said SAA had created a war room where staff were going through expenses minutely to ensure all previous excesses were taken off.