Tuesday, October 16, 2012

■ SOUTH AFRICA: No privatization for SAA despite a confirmed $150million loss: Gigaba.

SAA logoMalusi Gigaba, the South African Minister of Public Enterprises, speaking on the occasion of South African Airways (SA) Post-AGM Briefing at Airways Park on Monday 15 October 2012, bemoaned SAA's below par performance during the 2011/2012 Financial Year, noting that whilst the global aviation industry, as a whole, has suffered in the current adverse global economic environment, SAA still fared poorer compared to its peers across the globe.

SAA's Airways Park, Johannesburg
SAA's Airways Park, Johannesburg
Despite increasing its revenue base from USD2.58billion to USD2.72billion, the carrier still recorded a loss of USD150million with fuel costs accounting for USD250million or 33% of the airline's expenditure. Aircraft maintenance costs had also risen whilst the company's cash liquidity has fallen for the third consecutive year, to USD100million, from USD390million in 2010. It also reported USD14.6million in "irregular expenditure", up by USD9.7million from the previous year, with "wasteful expenditure" amounting to USD0.5million, up from USD0.25million in 2011; USD0.34million of which was due to baggage claims.

According to Gigaba, this showed that there were weak internal controls at the airline and questioned whether management at the airline had responded timeously to the aviation environment which has been experiencing difficulty. 

As a result, the Minister said he had approved the Company AGM’s motion that the Executive Directors’ receive no bonus for the 2012/2013 Financial Year.

The current status and the inability of the airline to continue operating without government support has left the Department of Public Enterprises with no option but to instruct the airline to formulate a long-term turnaround strategy:
Malusi Gigaba
Malusi Gigaba (News24)
"The current status and the inability of the airline to continue operating without government support has left the Department with no option but to instruct the airline to draft and implement a long-term turnaround strategy to sustain the airline for the foreseeable future.

This increases undue pressure on the Shareholder continuously to have to justify why we are maintaining a national carrier; why Government is involved in the business of airlines at all. This is a situation that is totally unacceptable as there are other very well run, competitive, sustainable, financially-viable and even profitable state-owned national carriers and there is no reason why SAA should not be like them!"

When asked about the likelihood of SAA being privatized, Gigaba responded that there are no plans for privatization adding that it was strategic for Government to own the national airline:
"There's nothing inherently inefficient in a state owned entity. For us, we believe it's strategic for the state to own it."

On the issue of the resignation of eight members of the SAA board at the end of last month, including the chairperson of the SAA Board Cheryl Carolus; Russell Loubser; Bonang Mohale; Louis Rabbets; Jabulani Ndhlovu; David Lewis; Teddy Daka, Maggie Whitehouse and lastly, the airline's CEO Siza Mzimela, Gigaba thanked the CEO and her colleagues for their service and reinforced the point that, despite their mass departure, there was no crisis at the national airline.

Mapping the way forward, Gigaba stated that he had formed a task team made up of the Chairperson of the Board of Board of Directors of SAA, the Chairperson of the Board of Directors of the South African Express (SAX), the CEO of SAX, the CEO of Mango together with the Acting Deputy Director-General: Transport Enterprises in the Department to provide him, before 15 December 2012, with a road-map on the critical success factors necessary for the airline's turnaround.