FOLLOWING the revelation by
Finance Minister, Pravin Gordhan,
in Parliament on September 13 that
SAA had recorded a loss of R4,7bn for
the year 2014-2015 and R1,8bn for
2015-2016, the airline could find that
the conditions attached to the R4bn
government guarantee might force it to
axe unprofitable routes.
As one of the conditions set by the
Minister, SAA needs to scale back
operations and close routes that have
been making losses for longer than
one year.
The Minister said some of SAA’s
long-haul routes, including Hong
Kong, would need to be scrutinised.
However, an industry expert told TNW
that certain routes, like Hong Kong,
although losing money, still added value
to the network.
An inside source at SAA, said lossmaking
routes that could face the axe
were Brazzaville, Cotonou and Pointe
Noire, while domestically Port Elizabeth
and East London also lose money.
The Minister said the board and
management at SAA would need to
review the routes and see how they
could balance the non-profitable routes
with the profitable ones.
The total guarantees currently stand
at R19bn. He said the R4bn and R5bn
loans would come up for payment
between the end of September and
January next year. SAA will either need
to pay these loans or request that the
loans be rolled over.
“It is true that if the government
removed its guarantees, SAA would
currently be insolvent,” the Minister
said, adding that the airline only
expected to be profitable in 2020-
2021. However, he pointed out that the
airline was a public asset and that if
it did well, would benefit the state and
the people.
The first priority, according to the
Minister, is for the board to appoint a
capable ceo and cfo, who will be able
to implement the turnaround strategy.
The appointments will be done within
the next few months. The board has
also been asked to review all
current staff suspensions to
determine whether they are
just and fair and in accordance
with the law.
A possible merger between
SAA and SAX is also on the
cards in a couple of months.
On the issue of privatisation
of the airline, the Minister said
it was important to first focus
on getting the board working,
getting a management team
in place, having an effective
strategy that supported
tourism and other objectives.
“Then, we can talk about
how we get more equity into
the airline and make it more
profitable.”
