Minister Brown questions SAA’s bailouts

STATE guarantees are not the
answer to the SAA Group’s
continued challenges,
says Public Enterprises
Minister, Lynne Brown. “It
has become clear to me
that simply extending State
guarantees to the airlines
is an inadequate response
to the challenge,” she said
during her budget vote
speech in Cape Town.
Lynne warned that an
“extraordinary intervention”
would be required to put the
SAA Group on a sustainable
footing and to support the
airlines’ turnaround effort.
However, she didn’t specify
what this intervention would
entail but hinted that the
airline could currently be
undercapitalised.
The minister acknowledged
that the environment
in which SAA and SAX
operated domestically and
globally had become more
challenging with intensified
competition, narrow margins,
cost pressures due to fuel
prices and currency volatility.
“In this context, their
undercapitalised balance
sheets severely constrain the
airlines, leading to continued
losses and affecting the
going concern status of the
companies.”
In a City Press report,
Lynne said she was not
considering privatisation. “In
the short term, I think that
[the privatisation] debate
is probably not one I am
considering now. And as time
progresses, there are other
forms of financial modelling
we can look at, for instance,
private partnerships,” she
said.
Spokesperson for SAA,
Tlali Tlali, declined to
answer questions on
how a shutdown of state
guarantees would impact
on the airline’s Long Term
Turnaround Strategy. He
referred all questions to the
minister.
The Ministry of Public
Enterprises did not reply
to numerous requests for
comment.