Saturday, February 21, 2009

SAA puts out begging bowl (again)

South African Airways (SAA) has lost nearly R14 billion since 2002. I say, cut the cord and kill the darn thing. Let it go. We can do without it. There are plenty of airlines that will service South African routes profitably and competitively.

For years SAA has been run like a private plaything for black well-connected elites, the most recent being douche-bag
Khaya Ngqula. We cannot afford to be pumping billions in taxpayer money into a bottomless pit, not when millions of people are living on $1 a day in South Africa.

Previous posts;

SAA crew in cocaine bust at Heathrow (again)
End of gravy plane for SAA boss?
SAA’s $3m golf splurge

'Sack SAA's boss now'

SAA security firm's ANC links

SAA crew held in london for 50kg of dagga

This Is Your Captain Speaking ....

SAA boss in air-miles scandal

CEO scores big as SAA posts huge losses
Luggage theft on SAA flights on the rise

UPDATE 19 Feb 2009: Finance Minister Trevor Manuel justified the government's R1,6bn cash injection into South African Airways (SAA). (this will continue as long as the ANC continues to place cronies in high paying executive positions without the ability to do the job and having control measures in place that stop said cronies using public enterprises as their private playthings - Ed.)

Unprofitable South African Airways (SAA) could not keep going without a big state capital injection, the national airline's executives warned yesterday.

SAA is expected to post a significant loss for the year to March for the third year running because of interest payments well in excess of R300m and losses from hedging against the volatility in the fuel price.

Higher fuel costs and falling passenger numbers have also contributed to its troubles.

SAA suffered a loss of R1bn last year, and its loss was R833m the year before.

SAA chief financial officer Kaushik Patel warned that the airline's precarious financial situation was likely to deteriorate even further as it was severely undercapitalised and burdened by debt, which exceeded its equity by 10%.

No business could survive in the long term with such a load, Patel told Parliament's public enterprises portfolio committee during a briefing. It was just not sustainable.

The economic meltdown would make the situation worse as passenger volumes and revenue slumped.

Public enterprises deputy director-general in charge of transport Andrew Shaw also warned that SAA was "very inadequately positioned to deal with the recent turbulence in the aviation market. It remains very thinly capitalised."

The carrier's sustainability was threatened.

SAA's level of indebtedness was among the highest in the world, and was even higher than those of American Airlines and Delta, which were placed under bankruptcy protection, Shaw said. He noted that 35 medium-sized network airlines were liquidated last year.

Failure to get sufficient funding from the government meant that SAA had to pay more for its borrowings than would otherwise be the case. "The interest burden as a whole is so big that it wipes out all operational profits," Patel said.

About R300m in interest has been paid this year on loans taken out against government guarantees of R2,86bn, and even more for the airline's total debt book.

SAA also has a liability of more than R1bn for its Voyager loyalty programme, which has still to be taken on to its books.

The Treasury turned down an SAA request for a R5,2bn capital injection, which would have brought the percentage of debt to equity down to a more acceptable 60%-70%. Instead, SAA got only R1,6bn in the 2009-10 budget.

Patel would not be drawn on SAA's estimated hedging loss, saying this would depend on the fuel price on the last day of the financial year.

But he stressed that after the R6bn hedging loss in 2004, which wiped out SAA's capital base, a conservative hedging policy was adopted. This limited hedging to 40% of SAA's total book compared with 80% at some international airlines.

SAA head of restructuring Vera Kriel told the committee that cost savings of R2,3bn were achieved in the period to December, about 35% higher than the target of R1,7bn and equal to the total 2008-09 target.

Acting CEO Chris Smyth emphasised that SAA was operationally sound and profitable. All of its domestic routes were profitable, as were all international routes last month, except for New York.

Africa was still the most profitable market.

He conceded the drug trafficking incidents involving SAA crew had caused "horrendous" damage to SAA's image. The cabinet was also gravely concerned about this, it said in a statement after a meeting.

2 Opinion(s):

Anonymous said...

Trevor Manuel implied that the R1,6 billion bail out would be the last SAA would get. But why give them the money at all? I agree with Doberman, let that pile of shit be wiped out now.

Joe King said...

Don't fly SAA - if you can! I refuse to support this corrupt and incompetent drug smuggling organisation.They should put Maria Manuel in charge of this dung heap and let her call in the hire and fire crew. Repeat after me, BEE, ANC, AA, SAA, Transet, SABC [add your own]do not work. Its time that these black racists start freeing theselves from thier mental slavery - none but yourselves can free your mind! (BM)