Treasury still mulling yet another bail-out for SAA

2013-11-18 00:00

IT is uncertain whether Treasury will bail the sinking South African Airlines (SAA) out yet again.

If Treasury decides not to pump more billions into the national airline, it will cause the largest crisis in the almost century-old institution’s history. It would also support demands by critics of unprofitable national carriers for SAA’s closure.

No decision has been taken eight months after the airline submitted its annual budget. The airline’s financial year ended March 31 and, like all state entities, it had to submit its books to Parliament by September 30.

Due to Treasury’s delay, this could not happen and the airline could not hold its annual general meeting.

Public Enterprises spokesperson Mayihlome Tshwete said SAA “is still busy ironing out a few auditing issues” before the financial statements can be completed.

Two sources who wanted to remain anonymous said the airline was technically insolvent.

If Treasury refuses to bail out SAA, the financial statements will have to reflect the airline is no longer a viable concern. This must be avoided and that is why the financial statements are being delayed, sister paper Beeld’s two sources said independently.

Beeld understands the airline had suffered a loss of almost R1,5 billion in the 2013 financial year. In 2012, it was a R1,2 billion loss. The current book year is also adding up to a huge loss.

The SAA had since 2002/03 tallied up total losses of R15,6 billion.

New board chair Dudu Myeni wrote in her latest newsletter that the SAA is busy with a turnaround plan that will fix things, but stressed that they needed time to achieve success.

The main challenge the SAA faces is its cash flow and old planes that make each transcontinental flight a loss.

The airline has since September 1, 2012, relied on a government guarantee for a R5 billion loan to cover its running costs. This backing ends in 10 months.

Treasury spokesperson Phumza Macanda said SAA earlier this year applied to have the deadline extended, but said the request was still being considered.

SAA spokesperson Tlali Tlali said the airline was a running concern despite the weak financial statements, as access to the R5 billion guaranteed loan was still sufficient.

Sources who worked for SAA before it was removed from Transnet, said the airline was cut loose without a decent capital injection to set it up, leading to a history of weak financial statements.

“With the necessary capital injection the airline could be a success and contribute more to the economy than the $9 billion (R91,4 billion) a year that is currently the case.”

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