SAA again bailed out by Treasury

2014-01-22 00:00

CAPE TOWN — The Treasury has again bailed out South African Airways (SAA) with a government loan guarantee of R5 billion. The airline uses this guarantee as security to borrow money.

The SAA has already borrowed R3,2 billion against this government guarantee. Observers are concerned that most of this money had been spent on running costs like salaries. The airline had not yet published its financial statements for the year ending on March 2013, reportedly because it was waiting on the negotiations for a further guarantee from the Treasury to be finalised.

The SAA in 2012 reported a loss of R1,2 billion. Informed sources say the SAA will in its 2013 financial year report a loss of about R1,5 billion and is already heading towards more losses in the current year.

SAA spokesperson Tlali Tlali said the loan guarantee was extended and the auditors were satisfied. He said the loan guarantee had not been increased, just extended. He said the new conditions of the extended loan guarantee will soon be finalised.

The two-year loan guarantee was initially granted on September 1, 2012, and would have ended on August 31 this year. The extension has now offered a reprieve.

Tlali said the airline had last year borrowed R1,5 billion against the guarantee. “The second, recent amount that was borrowed was R1,7 billion,” Tlali said.

The airline tabled a turn-around strategy in Parliament in February 2013, but what the plan entails and how successful it has been to date is not clear.

Chair of the SAA board Dudu Myeni said in a recent newsletter that the turn-around strategy needed time.

“The situation cannot be turned around overnight.”

The SAA is losing money on all its overseas flights, including R300 million per year on the Beijing route and about R50 million per year on the London route.

Yesterday, Treasury spokesperson Jabulani Sikhakhane did not want to comment. He said queries could be made at SAA’s annual general meeting next week Wednesday.

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