SAA puts its AGM on hold in bid to secure bail-out
THE severity of South African Airways’ (SAA’s) weak financial position was exposed yesterday when its shareholder, Public Enterprises Minister Malusi Gigaba, was forced to ask Parliament for a postponement of the tabling of the airline’s annual report.
The Department of Public Enterprises is working furiously behind the scenes to win support from the Treasury to inject up to R6bn into the beleaguered airline, and to avert questions about its "going concern" status.
SAA’s annual general meeting (AGM), which was supposed to be held on Tuesday, had to be postponed to a later, unspecified date because the Treasury could not be convinced that SAA’s plans for the bail-out were viable.
The airline’s financial year-end is March 31 and, in terms of the Public Finance Management Act, it is required to publish these statements within six months of that date.
In a letter to the speaker of Parliament yesterday, Mr Gigaba said the airline had been unable to finalise its annual report due to the need to address its "immediate financial challenges" for its auditors to complete the financial statements.
"Accordingly, I postponed the AGM, as SAA has not been able to finalise the 2012 annual report in order to meet legislative requirements. To this end, my department is in discussions with the National Treasury to find a resolution to the financial challenges of the airline."
But money allocated to SAA now will have no effect on its operating performance in its financial 2011-12 fiscal year. An injection of capital or a guarantee from the state can only influence next year’s outlook.
Doubts about SAA’s ability to service current debt — or the liability it may take on when buying the 20 A320 aircraft it plans to acquire over the next five years — will seriously dent its image among consumers and service providers and could harm its ability to borrow. Banks would be loath to lend money to a company with a disclaimer or adverse opinion from its auditors.
SAA said yesterday that, following Public Finance Management Act guidelines, it had submitted its annual report to the Department of Public Enterprises, whose spokesman, Tlali Tlali, said the support SAA was asking for from its shareholder was still under discussion.
Less than a month ago, Mr Gigaba sacked the board of South African Express, after the regional carrier was unable to present financial statements for the 2010-11 financial year at its AGM.
The South African Express saga has yet to fully play itself out and it is unclear whether it will only be the board that is removed — the department has stated that any executive who contributed to the accounting chaos at the company would be held accountable.
The reluctance the Treasury has shown to support SAA implies that any funds extended to the carrier will come with stringent conditions. These could precipitate big changes at the airline’s eventual AGM.
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