SOUTH African Airways (SAA) has so far not presented government with a viable long-term strategic plan that would justify the state ploughing more money into the airline, Minister of Public Enterprises Malusi Gigaba said on Wednesday.
In February, SAA told Parliament that it would need an injection of between R4bn and R6bn from the government in order to recapitalise the airline and fund operations. This would be in addition to the R1.3bn subordinated loan SAA already has from the government, and the R1.6bn it obtained to underpin its cash requirements after auditor-general Terence Nombembe raised concerns last year about its ability to generate sufficient cash to fund operations.
Mr Gigaba told the Cape Town Press Club that no decision had been taken yet on the request, which has been on the drawing board since the beginning of the year. He said discussions were ongoing between himself, Finance Minister Pravin Gordhan and SAA but that neither he nor Mr Gordhan was satisfied that SAA had a viable long-term strategy, which they believed was necessary before they could agree on financial support.
“The support must not be short-term support that will need to be reinforced in the next year or two,” he said. “Up till now there has been no vision. There have been a number of so-called strategies that were not implemented.” Mr Gigaba stressed that stringent conditions would be attached to any financial aid, which would not come “cheap and easy”.
SAA’s long-term strategy would have to include a “robust cost-cutting plan” which would slash current incentives to employees, such as free flights. “The country cannot continue to sacrifice for SAA when the airline does not sacrifice for the country. This has to end,” the minister said.
SAA would have to withdraw from unprofitable routes and focus on more profitable ones. Indications were that Latin America, Asia, the Middle East and Africa were the most profitable routes and were expected to be more profitable than others in the foreseeable future.
SAA might have to focus on these routes and rely on its alliances to take people to other places, such as Europe. “We have to benefit from our alliances to take passengers on unprofitable routes,” he said.
SAA has justified its request for more funds on the grounds that it has never been properly capitalised by the state, despite the numerous cash injections it has received in the past. which were not sufficient to establish a sound debt-to-equity ratio.
SAA plans to get rid of all of its short-haul Boeing 737-800s by 2017 and, in the meantime, has begun taking delivery of a fleet of its new Airbus A320 aircraft, with 20 more due over the next five years.
SAA would not be drawn into a public spat with Mr Gigaba.
"With regard to the question of alleged disagreements between the minister and the CEO of SAA, the airline would like to state categorically that these rumours are entirely baseless," spokeswoman Dileseng Koetle said. "
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