‘Technically insolvent’ SAA says it is at a precipice as strike looms

The leadership of struggling flag carrier South African Airways has said that questions around its ability to continue operating as a going concern were behind its failure to table its annual report for the 2018-19 financial year.

SAA was briefing Parliament’s Standing Committee on Public Accounts on Wednesday after it failed to table the report as required by law.

A delegation told the committee that Auditor-General Kimi Makwetu’s reservations about whether the national carrier could continue on as a going concern would make accessing much-needed finance harder.

Unions at SAA have threatened to strike after the company said it may have to cut hundreds of jobs to save costs. The delegation told the committee that a strike by unions appears “imminent”. The National Union of Metalworkers of South Africa and the South African Cabin Crew Association have scheduled an urgent media briefing on Wednesday afternoon in Johannesburg.

SAA said that at the same time that its ability to operate as a going concern hung in the balance, it desperately needed access to finance. Board member Martin Kingston told the committee that a key issue for the airline was its ability to maintain access to financial service markets. Kingston said stabilising SAA’s liquidity depended on refinancing R9.2 billion in debt, securing R2 billion for working capital, reducing costs and boosting revenue.

“We have limited access to liquidity; we are technically insolvent and that presents a threat to the company if it is not resolved. We need to be able to satisfy ourselves as a board that we are a going concern. We are unable to provide that certainty to ourselves or to our stakeholders,” said Kingston.

He said if financial assistance was not given to the national carrier soon, R40 billion worth of financial obligations would have to be settled “immediately”.

READ MORE: ‘Mother of all strikes’ ready to paralyse SAA

Kingston said the possibility of strikes by employees was a threat to the national carrier. Industrial action would make its dire financial situation and floundering investor and client confidence worse. He said the company ran the risk of losing R50 million daily if a strike were to ensue.

“I have to say we are at the precipice, chair, with the threat of impending strikes. All of this, I must say, despite by the very significant support from the shareholder, presents a significant risk of the company,” Kingston said.

Finance Minister Tito Mboweni announced in late October that the government would help SAA repay its R9.2 billion in government-guaranteed debt over the next three years.

SAA acting chair Thandeka Mgoduso, meanwhile, told SCOPA that the national carrier was focusing on minimising the impact of section 189 retrenchment processes and salary increase demands by unions and the impending strikes. SAA has received notice of intention to strike from unions, Mgoduso said.

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