SAA set to dip into state pot

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 state-owned airline made use of an emergency short-term loan of about R550-million to cover fuel costs for flights in the festive season and must repay it within three months, the Sunday Times reported yesterday.

SAA spokesman Tlali Tlali referred queries to the Department of Public Enterprises.

The department was instrumental in securing the R5-billion loan guarantee from the Treasury last year towards the end of a turbulent 12 months for the national carrier.

Half of SAA's board members resigned in September shortly after it emerged that the company's request for a R6-billion recapitalisation would not be granted. A few weeks later CEO Siza Mzimela, and two senior managers, also resigned.

SAA had an operating loss of R1.3-billion last year, bringing total losses in the past decade to R14.7-billion.

Two low-cost airlines serving the domestic market - Velvet Sky and 1time - folded last year citing high fuel costs.

But the state-owned company burned through R3.3-billion in cash in the past two years, mainly because of more expensive fuel.

Part of SAA's turnaround plan entails buying aircraft that will be more fuel-efficient.

Public Enterprises spokesman Mayihlome Tshwete would not go into detail about the loan to SAA during the festive season.

"SAA is a company in financial distress and the shareholder is involved in its turnaround strategy," he said.

The government is SAA's only shareholder and has given it financial support to the tune of R15-billion in a decade.

Public Enterprises Minister Malusi Gigaba said in October that SAA would have a turnaround strategy in place within two months and a new CEO within three.

Tshwete confirmed that the Treasury's guarantee has stringent conditions and that SAA has not taken a loan against it.

Other industry players have criticised SAA for using state backing to compete in the domestic market.

Erik Venter, CEO of low-cost airline and Mango competitor Comair, last year slated the government for continuous SAA bailouts, saying they were having a disastrous effect on competition.

He also requested more transparency in SAA's involvement with Mango.