SAA needs billions for turnaround strategy – CEO

2013-12-06 15:39

SAA needs billions of rands in government funding and won’t break even for four to five years, chief executive Monwabisi Kalawe has said.

The financing could come as a guarantee or a capital injection, Kalawe said in an interview with Bloomberg Africa TV to be broadcast tomorrow. “Like any company, whether it’s a private company or a publicly listed company – at some stage you go to your shareholders for financial assistance,” he said. “That’s what we’re doing.”

SAA is battling with loss-making routes, an aging fleet, rising fuel costs and a weak balance sheet. Its earnings report for the full year through March has been delayed amid discussions of further state support.

“It’ll take us between four to five years to break even or make a small profit, so when we announce our results we will tell the market that we made a loss again,” said Kalawe.

The airline is seeking to upgrade the engines of its aging Airbus SAS A340 wide-body fleet as part of a plan to lower fuel costs. The company wants about 30 new aircraft, yet can only afford to lease rather than buy the planes, said Kalawe.

“Because the balance sheet is weak, we have no option but to lease the planes,” he said. SAA is evaluating “tenders, and of course the delivery of the planes is going to take place over a 10- to 15-year period.”

SAA is shifting its focus to expand in faster-growing African economies after cancelling its unprofitable route to Buenos Aires and putting its Beijing flights under review.

One option “is to look at setting up a hub in West Africa,” said Kalawe. “That hub will allow us to connect southern Africa to West Africa and to the West. That’s really where our strategy is looking at.”

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