SAA, Mango, SA Express to merge in turnaround plan

10 September 2013 - 15:29 By Sapa
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South African Airways
South African Airways
Image: Business Day

Public Enterprises Minister Malusi Gigaba unveiled a long-awaited turn-around strategy for troubled SA Airways (SAA), but it was immediately criticised for lacking detail.

The 12-year plan was aimed at bringing the national carrier back to a point where it could leverage off its balance sheet, Gigaba told Parliament's portfolio committee on public enterprises.

Consolidating flight routes and cutting those which were not viable or essential was central to the plan. Most of SAA's international routes were running at a loss, and Gigaba hinted that local and African operations would be prioritised.

"The focus on domestic and regional African routes will have a direct financial impact on SAA," he said.

"It will be able to leverage off its balance sheet without the stringent conditions imposed by lenders due to a weak financial position."

The plan would be implemented in a "speedy and unyielding manner", he said, adding that "failure is not an option".

Increased efficiency, fleet renewal, and cost savings were other pillars of the plan, as was an envisaged brief to all government departments to exclusively use SAA for work travel.

He said the latter would be modelled on the US's Fly America Act, but added that it would be "fruitless if [SAA] had a bad public service record".

Crucially, the strategy also envisages merging all the state's aviation assets -- SAA, SA Express, and low-cost subsidiary Mango -- into a single holding company to reduce running costs.

New CEO Monwabisi Kalawe hailed the blueprint as the most comprehensive in the airline's history, but said details on routes, recapitalisation, and a company merger could not be given at this point. Neither would he put a timeframe on a return to profit for the embattled national carrier.

Merging the three airlines would entail complex legal processes and it would be clear only in early 2014 whether this could work, he told reporters.

SAA reported a loss of R1.25 billion last year and is being kept alive by a R5bn National Treasury guarantee.

Asked when the plan envisioned SAA no longer needing state hand-outs, Kalawe answered: "We will only be able to answer that when we understand the quantum of recapitalisation from the stakeholder."

Democratic Alliance MP Natasha Michael said it was unacceptable that Parliament was not being told how much money was needed to implement the turn-around strategy, nor being briefed about the company's current profit sheet and which routes would be scrapped.

Kalawe said the routes were being discussed with the government departments which would be affected by cuts, and the company's financial statements could be released only once they had been shown to the stakeholder.

"We are not deliberately keeping information from this committee, we are respecting protocol."

He acknowledged that turning the SAA around would be a major challenge given the "headwinds out there" of strong competition, high fuel costs, and a weak currency.

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