Trade union Solidarity has called on President Cyril Ramaphosa, Minister of Public Enterprises Pravin Gordhan and Finance Minister Nhlanhla Nene to support its application to place South African Airways (SAA) under business rescue.
The head of the union’s research institute, Connie Mulder, said Solidarity was concerned about the national carrier’s fiscal position after statements released last week revealed an R5.4 billion loss and that the airline planned to inform parliament about a similar loss in the 2018 financial year.
“We’ve gone and said but the auditor-general [AG] has serious concerns about the going concerns, and we share in that, and it is quite obvious that this is not sustainable, so if you are going to do more of the same, you are going to get more of the same,” Mulder said on Radio 702.
He described the union’s application to place SAA under business rescue as a radical intervention aimed at turning the airline around so it can start making a profit.
“That’s why we’ve approached government and asked them to join us in this application,” he said.
Mulder said the national carrier is not the only state-owned enterprise (SOE) that needs change as other SOEs whose performances are negatively affected by corruption and mismanagement need to be dealt with, too.
“When you put them into business rescue, you’ll have a business rescue practitioner who takes over and puts up a business rescue plan,” he said.
He added that it is possible to turn SAA around and that there is a good business opportunity for an airliner operating in the southern band to make money for the government, citing Air New Zealand as an example.
“What is going to be critical is getting a matter of privatisation involved, we saw this working for Telkom where they got private partners involved and then it started making a profit,” Mulder said.
He said a profit-centred business model would not only be a positive for the airline and government, but customers would benefit as well through better deals.
He added that the airliner’s going concern status flagged in the AG’s report is worrying, and would not be good news for workers at the national carrier.
Mulder further said if the issue is not resolved at SAA, then the public would be forced to bail it out with millions of rands that would go down the drain.
Over the nine months to the end of 2017, SAA made a further financial loss of R3.7 billion, as revenue dipped about R1 billion below its forecasts for that period.
For the current financial year, the company is expected to show a loss of just less than R5 billion.
The national airline saw a decline in passenger numbers in the period under review and dropped fares in response to increased competition. At the same time running costs rose, largely as a result of steeper fuel costs.
The airline has been a burden to the national purse for years, with then finance minister Malusi Gigaba dipping into the National Revenue Fund in September last year to give it a bailout of R3 billion to prevent it from defaulting on its debt obligations to Citibank. This followed an R2.2 billion bailout in June to enable it to cover its repayments to Standard Chartered.
In February, Gigaba – shortly before he was moved to the home affairs portfolio in a Cabinet reshuffle – said government remained committed to plans to recapitalise SAA to the tune of R13 billion.
The airline late last year, after CEO Vuyani Jarana took over, negotiated the refinancing of R6 billion in debt to local lenders.
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