Premium Journalist
4 minute read
11 Jul 2018
8:50 pm

SAA will not be privatised, no business rescue – CEO Jarana


But he conceded today that most of SAA's domestic routes are loss-making, saying 'we are trying to bring back the commercial logic'.

Former SAA chief executive Vuyani Jarana answering questions in parliament, 7 July 2018. Picture: Ayanda Ndamane/ANA

South African Airways (SAA) chief executive officer Vuyani Jarana today reiterated the country’s national airline would not be privatised and again ruled out the possibility of the airline being placed under business rescue.

“We need to make the business attractive to potential suitors. Treasury is looking to move that process forward. But we do not believe that entering into business rescue will achieve different results from what we are doing,” Jarana said replying to a question at the 2018 Southern African Transport Conference (SATC) underway at the Council for Scientific and Industrial Research (CSIR) International Convention Centre in Pretoria.

Jarana said the airline needed to amend the commercial delivery side of its operations, explaining that the framework to do this needed to be correct.

“We are trying to bring back the commercial logic. We are in the business of moving customers from one point to another safely and comfortably. But we also have to do this profitably. So, commercial logic is about understanding the market; knowing where to fly; how we fly and how frequently we fly, while balancing customer demands and expectations. It is also about how SAA buys assets and at what price,” he was quoted as saying in a statement.

“We are taking a comprehensive review of the heart of the business. The good thing about SAA is that the airline’s operations are solid; it is a good airline that has a challenge with its business logic. We have to make hard decisions as a business. We have looked at what the market is telling us, which is that there is more demand for low-cost carrier services.”

Speaking on trade union Solidarity’s steps to place SAA under business rescue, Jarana said the union did so because it “wanted a sustainable national airline that would not retrench staff; which included private sector participation; and an airline that is not a burden to the fiscus”.

“We have ongoing conversations with a number of unions, although Solidarity was not a part of the conversations initially. We brought them in to understand the context of what they are trying to achieve through the process of business rescue. We explained that what they want to achieve has already been stated by the government, so there is no need to go through a business rescue.”

On Monday, Solidarity said it would reveal the extensively written undertakings it has received from SAA. According to the union, these undertakings have come as a result of its intention to bring an application to the courts to have embattled national carrier SAA placed under business rescue.

Solidarity had made a number of demands during talks between Jarana and Solidarity’s chief executive Dirk Hermann.

“Some of the undertakings have major strategic implications for SAA,” Hermann said at the time.

Jarana conceded today that most of SAA’s domestic routes were plagued by negative gross profit margins.

“We will restrict the inventory of full service carriers because we are carrying passengers where we have no prospect of making money. We are also bringing back skills. It’s about the culture and dealing with the psychology of the organisation. It needs to understand that we fly for profits. All of this is going to take a long time; it’s not going to be easy. But we are focused on doing what is right.”

He said SAA decreased the flight frequency to London from two flights a day to one flight a day as neither of the two flights were regularly full.

On June 7, Jarana ruled out the possibility of the airline being placed under business rescue.

“We believe we are already executing a recovery plan. We don’t believe the plan [from business rescue practitioners] is going to be significantly different,” Jarana told Parliament’s standing committee on finance which he was briefing on the cash-strapped airline’s fourth quarter (Q4)results.

He confirmed to members of Parliament (MPs) the net loss of the airline for Q4 was R1.2 billion more than was budgeted. This was due to a number of factors, most notably lower passenger numbers, lower fares, and higher operating costs being driven by increased fuel costs.

African News Agency (ANA)

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