SAA: ‘We have unsustainable levels of debt’
7 Jun 2019 - by
The SAA board has assured the public that the airline remains on track to meet its long-term turnaround strategy (LTTS) goal of breaking even by the financial year 2021/2022.
The airline held a media briefing on Friday in which it announced current gm of Operations, Zuks Ramasia, will move to interim ceo following the resignation of current ceo, Vuyani Jarana. The airline also announced the appointment of Adam Voss as ceo of SAA Technical and said an offer had been made to someone for the position of ceo of Mango Airlines.
The airline currently sits with just under R22bn in outstanding debt. Martin Kingston, SAA board member, told those gathered: “It is clear that SAA has unsustainable levels of debt on its hands.” Of that debt, there are two loans – R9,2bn and R3,5bn – that mature at the end of July. “We are in discussion with the lenders about paying the R3,5bn and extending the R9,2bn loan over a protracted period of time.” Martin elaborated that by repaying the loan of R3,5bn, the airline opened itself up to the ability to access additional liquidity for the current financial year. The airline requires R4bn in working capital for the rest of the current financial year to stay on track for the LTTS.
Martin said the board was considering forms of partnerships, like an equity partnership, to assist in achieving LTTS goals, but he added that this decision lay with the airline’s shareholder, National Treasury. “It is clear that at an appropriate stage, it may be appropriate to consider forms of partnerships and that will form part of the discussions that the board is already having with the shareholder about the state of the airline.”
He added that the same applied to any possible merger with SAA’s subsidiary, SA Express. Martin emphasised the long-term nature of these discussions, adding that state-owned enterprises must operate within a highly regulated structure that must be adhered to. There are also competition regulations that would inform the decisions.
Members of the board have met with National Treasury extensively – including four times over the past week – to discuss the state of affairs at the airline. Board Chairperson, JB Magwaza said: “Treasury must decide the needs of all state-owned enterprises. It need to balance the needs of all those organisations. We as SAA may not like it, but we understand it.”
Responding to questions regarding possible retrenchments, board member Thandeka Mgoduso said: “We are examining the organisational structure to ensure the most effective structure is in place for our LTTS. This is not the only area we are looking at for cutting costs. We look at the organisation holistically and if the reduction of staff numbers for efficiencies is a step that needs to be taken, then due process will be followed.”