SAA to dump routes

2017-08-27 05:58
Dudu Myeni

Dudu Myeni

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National carrier SAA is dumping routes, reducing flights and getting rid of some of its airplanes – all in a desperate bid to stay aloft.

Sources familiar with the plan to try to rescue the airline have told City Press’ sister newspaper, Rapport, that:

• The airline will reduce flights on its profitable Johannesburg-Cape Town route by more than a third;

• It plans to cancel all flights to Port Elizabeth and East London, as well as flights to all central African destinations;

• It will get rid of at least 10 of the more than 50 planes in its fleet; and

• It will further cut back its already reduced international flight offering.

The Johannesburg-Cape Town route was one of the most profitable flight routes in the world, but probably diminished in gainfulness because of the fact that there are now more direct international flights to Cape Town.

SAA currently has 17 daily return flights between the two cities.

One of the sources said: “The airline is going to make enormous sacrifices to try to ensure SAA’s survival, but none of it will matter as long as [the airline’s chairperson] Dudu Myeni remains involved. She has a destructive influence on the airline and the staff.”

The board term of Myeni, a close personal friend of President Jacob Zuma, comes to an end this week, but there is still no sign of her departure.

“It is a big cause for concern for everyone involved in the attempt to rescue the airline,” said a source in SAA’s employ.

“The current acting chief executive, Musa Zwane, was even admitted to hospital because of Myeni’s actions.”

This news comes in the wake of the surprising revelation by Alf Lees, DA spokesperson for finance, in Parliament on Wednesday that government may sell its 39.76% stake in Telkom in order to finance a R10bn bailout for SAA.

This information was contained in a classified Cabinet document, the authenticity of which has since been confirmed by a Treasury official.

The Telkom shares are actually worth R13.9bn, but it is expected that they will fetch only about R10bn because of the urgency of the sale.

The shares will, in all likelihood, be sold to the Public Investment Corporation, which can gradually sell them off on the open market.

With this move, government will forfeit dividends of about R800m a year which it currently earns from the Telkom shares.

Sources did not want to elaborate on incidents Myeni has been involved in, but she openly misled the standing committee on public accounts when she blamed a French consultant, Sylvain Bosc, for mismanagement and wasteful expenditure.

Bosc was, however, cleared of all charges before a disciplinary hearing more than a year ago.

The plan is to introduce the new flight schedule in October. But before that happens, loans of R6.785bn will first have to be repaid.

Government has, however, guaranteed these loans.

The loans in question were supposed to have been paid back in April, but this deadline was extended twice after representations were made to creditors.

Finance Minister Malusi Gigaba had asked for another extension, but one of the creditors, Citibank, which is owed R1.761bn, has refused.

According to a memorandum that Gigaba presented to Cabinet on Wednesday, defaulting on the loan will mean that the airline will immediately become liable for a further R7.8bn, which would otherwise only have been payable in tranches in 2019 and 2022.

Cabinet discussed the crisis and that same afternoon, Lees presented the memorandum in the National Assembly during Deputy President Cyril Ramaphosa’s question-and-answer session.

Aside from its debt issue, SAA’s operating capital is exhausted and it owes R750m to suppliers.

The situation is deteriorating fast, and it is unsustainable because SAA cannot generate enough money to pay its suppliers, Gigaba says in the memorandum.

He also suggests the capital injection of R10bn and that it should be financed through Telkom shares.

The African destinations that will get the chop are Blantyre and Lilongwe in Malawi, Brazzaville in the Republic of the Congo, Kigali in Rwanda and Libreville in Gabon.

Some of the African routes, as well as the routes to East London and Port Elizabeth, will probably still be served by SA Airlink, which is busy expanding its fleet.

The two daily flights between Johannesburg and London will be reduced to one flight a day.

SAA also plans to dispose of 10 of its planes. It owns only nine of its 50 planes and leases the rest, which costs it about R3.5bn a year.


Do you think that slashing these routes is the way to go for SAA? What else could the airline be doing to save money?

SMS us on 35697 using the keyword SABC and tell us what you think. Please include your name and province. SMSes cost R1.50

Read more on:    saa  |  telkom  |  dudu myeni

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