SAA suffers festive season hangover

2013-01-07 08:56

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Johannesburg - SAA could start dipping into the state's R5-billion loan guarantee by March if it does not repay a recent short-term loan from its operating income.

The Sunday Times reported that the state-owned airline made use of an emergency short-term loan of about R550-million to cover fuel costs in order to avert the grounding of the airline that would have left scores of local and overseas passengers stranded after the festive season holidays.

Finance minister Pravin Gordhan and public enterprises Minister Malusi Gigaba last week signed off a guarantee that allowed the national carrier to secure the R550m bank "facility" for fuel and other short term commitments.

Gigaba's spokesperson Mayihlome Tshwete told the newspaper there was nothing unique about the loan and that airlines all over the world had experienced financial challenges.  In October SAA would have a turnaround strategy in place within two months and a new CEO within three.

"This was in fact foreseen by SAA when it previously requested a R5bn guarantee. As management, we would not expose the airline to the possibility of being grounded at any time."

SAA's fuel contracts were under review, chief executive officer Vuyisile Kona told the Sunday Times. The airline, as the country's biggest buyer of fuel, was not getting the best deal, he said. "I am not happy with the pricing. In fact, I am getting the best deals overseas."

Kona took over in September when  CEO Siza Mzimela resigned along with half of SAA's board members shortly after it emerged that the company's request for a R6-billion recapitalisation would not be granted. In October Gigaba said SAA would have a turnaround strategy in place within two months and a new CEO within three.

Last year also saw two other local, low-cost airlines Velvet Sky and 1time closing due to the pressure of rising fuel costs.

Tshwete said "SAA is a company in financial distress and the shareholder is involved in its turnaround strategy ", part of which involves buying aircraft that will be more fuel-efficient.

The state's continuous bailout of SAA, to the tune of about 15-billion over the past decade has been crisitsed by other industry players, with Erik Venter, CEO of low-cost airline and Mango competitor Comair, slating the government for contributing to the downfall of domestic airlines.

Read more on:    mango  |  saa  |  aviation  |  flights

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