SAA task team set up

By Drum Digital
15 October 2012

A task team has been set up to advise on a turnaround strategy for SA Airways, Public Enterprises Minister Malusi Gigaba said on Monday.

"It is pivotal that the airline be immediately stabilised," he told reporters in Kempton Park.

"It is important that cost containment and revenue enhancement be the immediate focus of the airline."

The briefing followed the national airline's annual general meeting at which it reported a R1.3 billion operating loss for the year ended March 31.

The task team would include newly-appointed SAA chairman Vuyisile Kona and the CEOs of SA Express and Mango.

It would have to report back to Gigaba by December 15 on the "critical success factors" needed to turn the airline around.

The airline's newly-appointed board has also been tasked with coming up with a turnaround strategy for the carrier.

SAA CFO Wolf Meyer said the airline's losses over the past decade amounted to R14.7bn.

In early October, the National Treasury announced that SAA had been given a R5bn government guarantee to recapitalise. This would enable it to borrow from financial markets and buy new aircraft.

Gigaba said the turnaround plan had to include how to make SAA financially viable and independent of government support in the medium-to long-term.

It should also determine how SAA should configure its routes most effectively to be profitable.

"If you look at the present business strategy, every gain we make in terms of revenue on the African routes, we rubbish it on other long-haul international routes," he said.

The airline reported R128 million in irregular expenditure -- an increase from R85m the previous year.

Gigaba said this was concerning, as it "reflects weak internal controls".

He was also concerned about wasteful expenditure of R4m for the year. Of this, R3m was for baggage claims.

SAA CEO Siza Mzimela and two other senior managers -- corporate affairs general manager Theuns Potgieter, and general manager for legal risk and compliance Sandra Coetzee -- resigned from the airline earlier this month.

This came barely two weeks after most of the board -- including chairwoman Cheryl Carolus -- also quit, saying there was a lack of support from its shareholder, the public enterprises department.

Gigaba said he did not consider the board resigning a problem, as it was due to be replaced after the AGM, and "a fresh perspective was required to stabilise the airline".

"I am confident... that there is absolutely no crisis."

He dismissed reports that Mzimela had said his department had "meddled" in the affairs of SAA.

"We don't share the view that there has been meddling in any way.

"The outgoing CEO's opinions remain solely hers, since she did not have the courtesy to discuss them with us."

The board had agreed to freeze the salaries of executive and non-executive directors. Executive directors would get only a 4.5 percent cost of living adjustment for the coming year.

Gigaba said SAA subsidiary Mango had performed well and been viable since its establishment. SAA does not report Mango's results separately.

Mango's performance contributed to the government's confidence in SAA, he said.

"If the child behaves this way, at least the parent can behave better."

Gigaba said privatisation of SAA was "certainly not on the cards".

"There is nothing inherently inefficient in a state-owned company," he said.

Although SAA had performed below expectations for the financial year, and had fared more poorly than its global peers, Gigaba said it could be profitable, viable and commercially sustainable.

He warned though that the airline was operating in the "midst of economic turbulence" due to rising fuel prices and subdued global economic conditions.

The government, through the department of public enterprises, is the sole shareholder in SAA.

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