Turnaround strategy at SAA is slow to take off

2014-02-02 14:00

SAA’s long-term turnaround strategy remained a secret at the parastatal’s post-AGM briefing on Wednesday, with only five PowerPoint slides vaguely explaining what it was all about.

Dubbed Gaining Altitude, the strategy document is yet to be made public. Public Enterprises Minister Malusi Gigaba, whose department is responsible for SAA, remained tight-lipped, except to say the strategy contained targets for the short, medium and long terms.

According to him, the more immediate targets related to stopping the financial bleeding and planning new route networks. He said: “Some of the movements we have been seeing are

as a result of the network planning. [There are] very concrete milestones contained in the turnaround plan which are short term in reality.” SAA’s financial results show regional (African) contributions to total revenue reach R800?million in the year to March 2013, an improvement on the previous year’s R600?million.

Chief financial officer Wolf Meyer said the improved performance was a result of the maturing of new destinations launched during 2011, as well as positive returns from new routes launched in 2012. SAA now operates in about 21 cities in Africa.

Routes within South Africa contributed about R600?million to revenue, but a glance at contributions from international routes shows the financial bleeding is far from over as these routes recorded losses of more than R1.2?billion.

This was because of rising fuel costs and the weak rand. Some of the targets in the turnaround strategy, which CEO Monwabisi Kalawe let slip, involve fuel efficiency and fleet replacement.

But Gigaba said he was unhappy with recent requests for proposals related to these targets as they did not address industrialisation and localisation policy objectives.

He did not want SAA to spend on items that had no long-term benefit for the country. The turnaround plan still needs a funding mechanism, which Gigaba hopes to present to Cabinet by March. For now, SAA is using a R5?billion loan guarantee from Treasury to retain its status as a going concern.

Without it, the carrier’s negative equity balance of R849?million will make it technically bankrupt. The guarantee was converted to a “perpetual” one, which would be reduced in proportion with any future cash injections.

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