SAA will only reveal the details of its turnaround strategy in March, Mayihlome Tshwete, Spokesperson for the Department of Public Enterprises, told Tourism Update. The airline had previously announced it would reveal its turnaround strategy to the public in December last year.
However, Tshwete added that the national airline was taking the necessary steps. “We are currently addressing SAA’s business model to ensure the airline becomes an independent and profitable entity. We are convinced we can turn the airline around. Hard questions will need to be asked though and people will be held accountable,” he said.
SAA recently came under fire when it requested an emergency R550m short-term loan to cover fuel costs but Tshwete said the loan was part of the R5bn government guarantee that was already approved at the end of last year. “R1,5bn was put aside for operational costs such as this.”
Aviation analyst, Linden Birns, agreed that the loan was not necessarily a reason for concern. “Surely if there was a genuine risk of SAA defaulting on payment it wouldn’t have been able to borrow the money.” He said the Treasury’s loan guarantee was so that the airline could go out to the financial markets and enter into loan agreements. “One would have to be quite naive to believe the guarantee would not be used.”
Whether it is feasible to pay back the R550m within the imposed three months is something that needs to be discussed by SAA and the financial institution from which they received the loan, said Tshwete. He added that, if SAA were to default on the payment, the airline could rely on the State guarantee.
Is privatisation the answer?
SAA’s request for a short-term loan has led the DA to openly call again for privatisation of the national carrier. Natasha Michael, DA MP, issued a statement saying: “The endemic dysfunction of SAA has sapped public coffers for far too long. Privatisation of the national carrier is the only recourse and government can no longer hide behind the excuse of ‘national pride’ whenever privatisation is mentioned. There is no national pride in an airline that survives on repeated government bailouts; that posts losses of R1,25bn; and that has still not managed to come up with a viable turnaround strategy.”
“It’s never been a ‘national pride’ issue. I don’t know where the DA gets that,” Tshwete told Tourism Update. “SAA is in financial distress but that is not a reason to make rash decisions. There is no merit in privatisation. We need to fix the carrier’s problems and start realising its public value.”
Tshwete said there were a number of reasons why the government was not looking at privatising the airline, one being job creation. The airline currently employs 11 000 people directly and creates 35 000 indirect jobs. “A private company would not hesitate to retrench people to cut costs.
“The national carrier is also an economic asset for the country,” Tshwete added, explaining that SAA was servicing a number of routes that might not be profitable but that had great diplomatic value.
Birns agreed that, in light of South Africa’s pressing economic and developmental priorities, it might not be justifiable to put the economies of towns and cities like Bloemfontein, Kimberley and Upington at risk by placing their access to key trading and tourism markets in the gift of privately owned airlines.
He said neither privatisation nor state-ownership was a panacea for profitability when measured in pure monetary terms. “The key is efficiency, which is extracted and marshalled by a sound, capable management supported by an able board and shareholder on one side and a productive and committed workforce on the other. The nature of the ownership shouldn’t even be a factor.”
Chris Zweigenthal, CE of Aasa, said South Africa needed a strong, sustainable, profitable aviation industry in which SAA had a critical role to play. He said, in the absence of SAA, South Africa would be served only by foreign airlines from international destinations. “I do not believe that this is necessarily in the best interests of South Africa, which has traditionally had a strong airline industry with both State-owned and private airlines competing to provide required services for customers.”
