Cape Town - South African Airways dropped a bombshell on Friday when it told Parliament that its projected losses for this financial year would amount to R3.5 billion.
This was revealed in a response to questions asked by the finance standing committee when it enquired about operating losses should the economic environment become unfavourable.
In its reply, the embattled national airline said it was focused on growing its revenues and to continue to apply cost-cutting
measures.
It also said it was operating in a very competitive industry and was aware of the risk from the external factors.
“The board wishes to clarify that the company has not reduced its losses for the year under review, which we presume refers to the 2016-17 financial year.
“The budgeted loss for 2016-17 was set at R1.76bn, but the revised forecast refers to an expected loss of R3.5bn,” SAA said in its response.
The official opposition said there was no doubt these massive losses would mean that SAA would again run out of cash and would require a bailout.
“The DA will write to the Finance Minister, Pravin Gordhan, to urge him to refuse any further financial assistance to SAA, which is set on a path to self-destruction,” the DA’s Alf Lees said.
He said it was greatly concerning that this is R1.8bn more than the
R1.7bn loss that was projected four months ago.
“This will represent a real cash loss as it will not contain the R1.9bn Airbus deal impairments that contributed to the R4.9bn loss in the 2014/15 year.”
He also said that SAA could only be saved if put under immediate business rescue and action taken to achieve a private equity deal that would result in capital revenue for the shareholder and, thus, the taxpayer.
When he tabled the Budget last month, Gordhan had warned state-owned entities that the National Treasury would keep a watchful eye on risks linked to spending pressures amid slow economic growth.
The Budget review had stated that the financial condition of state-owned companies and public entities represents another significant risk over the medium term.
“Several state-owned companies, including South African Airways, require close monitoring and many require intervention to stabilise their operations,” the Budget review said.
It also said state-owned companies facing difficulties must demonstrate tangible progress in returning to profitability.
“Government will also explore opportunities to expand private participation,” the Budget review said.
Gordhan told the media at the time there would be equitable funding to be made to the SAA.
“That is work in progress and I will inform you in due course,” he said.
However, he said if there were new needs within state-owned entities, there should be reprioritisation.