SA Express has been granted a further government guarantee of R1.1 billion from Treasury to allow the airline to continue as a going concern, and to host an annual general meeting before the end of October this year.
Jabulani Sikhakhane, Spokesperson for the National Treasury, told Tourism Update the guarantee was made up of an extension of the R539 million guarantee that was due to expire at the end of February as well as an additional R567 million guarantee. Sikhakhane says, to date, SAX has borrowed the full R539 million against the existing guarantee.
He further explained that Treasury had agreed to the guarantee after SAX showed it had revised its business case and its financial modelling. “Taking comfort from the revised projections, the Minister of Finance concurred to the issuance of the guarantee to SA Express.”
The R1.1 billion guarantee is subject to stringent conditions, including regular reporting on the progress in implementing cost-cutting measures and reasons for any delays in meeting cost-cutting targets. The airline will also need to identify the individual managers responsible for delivering cost-cutting targets and provide a fully documented funding plan within 30 days. Sikhakhane adds: “Also, the shareholder compact must be translated into performance agreements for the airline’s executive management and be the basis for setting their remuneration.”
SAX CEO, Inati Ntshanga, could not be reached for comment at the time of going to press. Inati was quoted in Business Day saying the airline was working on internal ‘austerity measures’ to bring the airline to ‘sustainable profitability’. This included a review of the airline’s flight schedule.
This could bode well for SA Airlink, as the two airlines have been competing heavily on certain routes over the past few years. Rodger Foster, Airlink CEO and and md, told Tourism Update that, despite the fact that both Airlink and SAX were separate feeder airlines to SAA, the two performed exactly the same function and, as such, competed with each other for market opportunity.
“I can’t comment on SAX reducing or having reduced activities on routes that overlap with Airlink. What I can say is that there has been uneconomical overlapping of franchised activities, and just as you would not have two franchised fast food outlets on the same street corner, the abuse of franchise intellectual property by one franchisee by encroachment on another franchisee’s licence rights has had to be rationalised by order of the franchisor.”
Whereas SAX is owned by the state, Airlink is a private company where the state has a minority interest of less than three per cent held by SAA. SAX and Airlink both have a separate franchise relationship agreement with SAA, the franchisor. These separate franchise agreements entitle them both (SAX and Airlink) to make use of certain SAA franchise intellectual property, and each airline is separately licensed by SAA accordingly. Airlink does not rely on the state for any funding or any financial underpins of any nature.
