SAA will only be back in the black in 2019 - CFO

Cape Town – South African Airways (SAA) will continue on its loss-making path for the foreseeable future with losses of R2.8bn expected in 2017/18, MPs heard on Friday.

The SAA board and management and Finance Minister Malusi Gigaba briefed the standing committee on finance on the national carrier's finances and corporate plan, among other matters. Chief financial officer Phumeza Nhantsi disclosed that in addition to the loss in the current financial year, the airline will take a further hit of R1.8bn in 2018/19.

She sees SAA as possibly making a profit in 2019/20.

“The period under review is not looking good,” Nhantsi said, “but compared to last year the results were very similar. We’re a cyclical business and although the first quarter does not look good, it’s not necessarily an indication of what is in store for the rest of the year.”

She added that “in a perfect world” it would be a positive for the airline to get back some of the money in countries that have “dollar shortages”.

Deputy Finance Minister Sfiso Buthelezi said during a previous parliamentary briefing that SAA’s cashflow is affected by R1.05bn that cannot be repatriated from Angola, Zimbabwe, Nigeria and Senegal. He undertook to do everything possible to get these funds back.

Nhantsi said on Friday there are ongoing talks with Angola to repatriate some $62m, which will help SAA with working capital.

During question time, chairperson of the finance committee Yunus Carrim of the African National Congress asked Nhantsi if it’s true that SAA is “challenged” to pay salaries.

SAA went into a negative cash position in July of –R568m, forecast to increase to -R936m in August, which gave rise to concerns that it won't be able to pay its workers.

Nhantsi however assured MPs that salaries are a priority and that workers will definitely be paid.

More oversight from National Treasury

During deliberations, Carrim told Gigaba he appreciated his frank disclosure about the true state of affairs at SAA.

He also cautioned that there is a “healthy scepticism” among MPs about the information given during the briefing.

“Our MPs have been through this before. My view is that there’s a marginal improvement in the coherence of the strategy on which you presented today,” he told SAA.

“But these are just words at the moment. What has changed between the last time you were here and now?"

He also said that National Treasury needs to exercise far more effective oversight over SAA, without intruding unduly and interfering with the airline’s autonomy.

The end of the road for Myeni

Floyd Shivambu from the Economic Freedom Fighters asked Gigaba if government has a replacement in mind for Dudu Myeni, whose term expires at the end of September.

“Are we going to see Ms Myeni leave SAA on September 2? Because that was what was communicated to us in September last year when a new SAA board was appointed,” Shivambu said.

In response, Gigaba said Myeni has been SAA chair for the past eight years and that her contract is indeed non-renewable. “We’ll start a process to replace the chairperson and a decision will be communicated later.”

Rationalisation of routes

Earlier in the briefing, ANC MP Pinky Kekana raised the matter of SAA’s route network, questioning why South Africa has opened its routes to other airlines, even though they don’t reciprocate.

Gigaba said the rationalisation of routes is a tricky area. “Commercially a route may seem profitable, but when you’re faced with liquidity challenges such as SAA (has) you don’t behave as if it’s business as usual. You endure the pain until you’ve stabilised.”

He acknowledged however that SAA would not “fly to Heathrow, pick up passengers and then fly to Manchester”.

“Yet we allow it for others. We need to have this conversation, but we also don’t want to take illegal decisions (about route allocations) and then lose in court.” 

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