SAA says government’s R5.5 billion funding not enough to keep it going
South African Airways has announced that the latest cash injection from the South African government of 5.5 billion rand is not enough to keep it going.
September 24, 2019: South African Airways (SAA) has announced that the latest cash injection from the South African government of 5.5 billion rand ($376 million) is not enough to keep it going. A presentation to the country's lawmakers on September 18 showed the amount they have approved for the 2019-2020 financial year was insufficient.
Having not made a profit for the last seven years, and with losses of 5.7 billion rand for the current financial year, South African Airways is in a difficult position.
In total, SAA's debt is over 9 billion rand of legacy debt and 3.5 billion rand of working capital that has been provided to them by the banks. During the presentation, the airline told the ministers that it needs a further two billion rand working capital between now and December.
While South African Airways' problems are vast, the airline has been hindered by management and the inability to pay its debts in an increasingly competitive market. The South African national flag carrier needed a 5 billion rand bailout by the government. The plan the airline has come up with to get back into the black is a long-term strategy based on the injection of 22 billion rand.
The South African government is reluctant to keep giving SAA more money.
The government is reluctant to keep funding the airline while not seeing what SAA is doing to cut costs and streamline operations in a time when the country is experiencing weak economic growth.
With conditions the way they are, the government is considering how it would go about finding a commercial partner for the cash strapped airline.
During the presentation, SAA management said they were in negotiations with lenders for 2 billion rand working capital, but that they would have to meet certain conditions before the cash would become available.
According to Reuters, SAA told the lawmakers, "Lenders have the following conditions. Repayment of short-term funding of 3.5 billion rand by September 2019, which is already provided for, and a debt reduction and payment plan for the legacy debt of 9.2 billion rand."
The rot at SAA was exacerbated by state capture and the people who ran the airline into the ground through their corrupt practices. Former South African Airways chairperson Dudu Myeni has been accused of all sorts of misdemeanours, ranging from bribery to influencing meetings between Jacob Zuma and the Guptas.