SAA Board Walks Out Of Parliament, Fails To Deliver Turnaround Strategy

CAPE TOWN - Deputy Finance Minister Mondli Gungubele says South African Airways (SAA) will need at least R20 billion in order to possibly break even in three years’ time.

Gungubele is co-chair of the oversight body that is monitoring efforts to turn the national carrier around.

He revealed the figure on Wednesday morning while addressing Parliament’s Standing Committee on Appropriations, where SAA executives and board members are also briefing Members of Parliament (MPs) on efforts to restructure SAA.

Gungubele says SAA now has a clear turnaround strategy aimed at fixing its finances, corporate governance and operating model.

But he says that SAA needs money to keep afloat and restructure.

“By March 2019 the R9,2 billion will have matured as a debt, which must be paid to the funders. Over and above that, R12 billion would be required. All that together makes about R20 or R21 billion. With that in place, we are very positive that we are going to be on a path that will help us break even in 2021.”

SAA is in talks with the National Treasury and banks about arranging an open credit line.

SAA CEO Vuyani Jarana told the Standing Committee on Appropriations that SAA has already taken on more debt than it can carry, and that any financial aid will have to be “a mixed model”.

“We want to highlight this; debt alone is not the answer for SAA in the business model we have put together.”

SAA posted a loss of R5,6 billion in the 2016/17 financial year.

Gungubele says its losses for 2018 will come in at more than R5 billion and that its projected loss for 2019/20 is around R2 billion.

'COST OF LIQUIDATING SAA FAR HIGHER'

SAA last turned a profit in 2011 and has so far received around R20 billion in government loan guarantees and bail-outs.

But Gungubele says the cost of liquidating the state-owned airline will be far higher.

Gungubele says the cost of closing SAA down could be three times the R20 billion he says the airline needs.

“Another option, which has been punted around, about throwing this entity away… our calculations are that the implications are no less than R60 billion.”

Gungubele says SAA must pay down R9.2 billion in debt that becomes due in March 2019 and will need a further R12 billion over the next three years to keep going and to restructure.

Gungubele says he has confidence in the turnaround plan that Jarana and the new board have mapped out.

But Democratic Alliance MP Alf Lees says the extra R20 billion will bring the amount of taxpayer funds used to cover losses at SAA to more than R30 billion, without a single new aircraft being bought.

He says the party will be asking Finance Minister Nhlanhla Nene to explain why SAA should not be placed under business rescue.

(Edited by Zamangwane Shange)

Source : https://ewn.co.za/2018/04/25/gungubele-saa-needs-at-least-r20bn-to-possibly-break-even-in-2021

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