Who will save SAA?

2012-10-13 08:41

Minister says he will give embattled airline three months to decide

The question of who will lead South Africa’s national airline, South African Airways (SAA), after the resignation of its chief executive, Siza Mzimela, is not about to be answered in a hurry.

However, possible replacements that have been touted include Inati Ntshanga, CEO of SA Express, and Nico Bezuidenhout, chief executive of budget airline Mango, which have both done relatively well in recent years.

Minister of Public Enterprises Malusi Gigaba will this week meet with the board of SAA to discuss a way forward.

“I’m going to ask the board to give me a candidate name in three months, which I think is a reasonable timeline,” said Gigaba.

“Whether the CEO position will be filled by a local or an international aviation expert will be up to the board. What I do want though is for the candidate to be a well-tested leader with aviation expertise,” he said.

Asked to comment on whether he would be interested in the position of SAA chief executive, SA Express’ Ntshanga said his focus at present remained on doing the job he was employed for at the airline.

“Mr Ntshanga is fully committed to meeting his obligations at this time,” read the statement sent to City Press by SA Express.

It added: “That said, it has to be noted that Mr Ntshanga serves at the pleasure of the board and the shareholder (government).”

Vincent Masoga of the SA Transport and Allied Workers’ Union (Satawu) says it does not matter who leads the airline.

“What we are interested in is that the candidate be a credible individual who knows and understands the aviation industry, is committed to driving the transformation and development agenda, and will not compromise jobs.”

Although the carrier posted a R782 million profit for the 2010/11 financial year and a R442 million profit during the 2009/10 period, the challenge that SAA chief executive Siza Mzimela, who resigned last week, faced was the need to improve the airline’s balance sheet.

This is a financial statement that outlines a company’s assets and liabilities.

SAA’s liabilities exceed its assets by more than 300%. Last month, government agreed to grant SAA a R5 billion guarantee, subject to conditions that include a turnaround strategy.

The airline is expected to report losses north of R1 billion for the 2011/2012 financial period when the annual financial results are released later this year.

SAA’s levels of debt and the fact that the airline was cash-strapped means it was on the verge of liquidation – a reflection of more than just the impact of the state of the industry, but the manner in which SAA has been managed.

“The fact of the matter is that the airline has been trading recklessly,” said Gigaba. “This is why the guarantee is just for two years. We want SAA to have designed a turnaround strategy and vision by then to ensure that it’s efficient and financially stable, but on a long-term basis this time,” he said.

The state of the national carrier has resuscitated calls for it to be privatised.

Jasson Urbach, an economist at the Free Market Foundation, said: “SAA has cost the economy billions of rands, which is a dead weight loss and makes a mockery of millions of poor people who struggle to survive on a daily basis, let alone contemplate setting foot on an airplane that caters exclusively for South Africa’s elite.

“There is no incentive for SAA to improve because taxpayers will always be there to bail it out.

“The feasible option is for the government to sell off SAA in an auction that is designed to achieve maximum revenue for government.”

DA shadow public enterprises minister Natasha Michael added: “SAA is caught in a vicious circle and cannot seem to break from it. The airline has received R16.8 billion in bailouts to date.

“This is why we believe there should be discussion around it being privatised. There are many ways to carry out privatisation to ensure government continues to be a majority shareholder.”

But privatisation of SAA is not an option. Under the national growth path, government took the strategic decision to be involved in priority sectors, among them aviation, said Gigaba.

A key focus of this economic development strategy is regional integration.

Airlines and air routes to Europe are at present not profitable, but routes to several destinations within the continent are fuelling the success of airlines such as Ethiopian Airlines.

Satawu’s Masoga added: “Privatisation is not an option in South Africa as it will lead to retrenchments, going against efforts to create employment.

“Those who are punting it know that SAA is an important strategic and national asset.

“It has the largest footprint in South Africa and Africa, and is a key driver of tourism. Their motives are driven by profit and the welfare of the country and its people.”

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