Antoinette Slabbert
2 minute read
17 Apr 2015
11:00 am

SAA back to ‘going concern’ status

Antoinette Slabbert

South African Airways' (SAA) 90-day action plan was successful in stabilising the company from its sorry position in October last year, when it was technically no longer a going concern and had serious liquidity and solvency problems.

AFRICA RISING. Acting CEO Nico Bezuidenhout says SAA will save R2.5 billion over the next two years thanks to network optimisation. SAA will focus on growing its services into Africa – traditionally its most profitable, with less competition. Picture: Desiree Swart

This is according to acting CEO Nico Bezuidenhout who yesterday reported back on the plan to stabilise the state-owned company. The sale of a stake in SAA, or one of its subsidiaries, and low-cost airline Mango’s potential listing are being considered and there’ve been some offers, he says.

While he was not prepared to say much about these plans, he denied reports that SAA is in talks to sell a stake in the company to China Airlines.

Various possibilities are being considered. A proposal is to be made to National Treasury within the next 30 days and a final decision is expected before the end of June.

SAA’s return to going concern status was based on a further guarantee from government granted in December. The company now has a total of R14.5 billion in guarantees.

Bezuidenhout said decisions about the possible sale of stakes or subsidiaries will inform SAA’s future dependence on these guarantees, absent of a capital injection from government.

The results of the interventions will largely be seen in the 2015/16 results and will pave the way for the implementation of the revised corporate plan to ensure the company’s long-term sustainability, he said.

Costs cut

During the 90 days, SAA’s debt was restructured to reduce finance cost – relieving pressure on liquidity. Bezuidenhout said SAA is still 5% above its competitors on unit cost and therefore further savings are needed. R400 million in savings was realised in the 2014/15 financial year.

In the quarter ended November last year, SAA lost R6.94 million per day. This was reduced to R5.02 million in the quarter ended February 28. The company focused on supply chain, airline assets and human resources for cost savings. He said suppliers will be expected to reduce their invoices by 15% if they want continued business from SAA.

He said about 20 individuals are being investigated and may face disciplinary hearings regarding deviations from supply chain procedures.

As part of its shake-up SAA has also looked critically at its staff numbers which have grown by 14% since 2009, Bezuidenhout said. It has already frozen vacancies and offered early retirement in an effort to drive costs down. He said it will probably not be necessary to retrench, but if necessary, it will be considered.

Current board member terms have been extended for a further six months and according to a board review it’s functioning well, he said.