Unprofitable long-haul routes, increased competition by Middle Eastern carriers, and high fuel costs are some of the biggest contributors to SAA’s reported R1,3bn loss for the past financial year, Tourism Update reports.
Minister of Public Enterprises, Malusi Gigaba, said drastic measures needed to be taken and that SAA does not have the luxury of failing. “It is pivotal that the airline be immediately stabilised,” he said.
Gigaba added that, while global aviation conditions were challenging, SAA had performed worse than its peers.
SAA’s CFO, Wolf Meyer, said that if one were to take out the cost of the increase in fuel prices, the airline would have been able to report a net profit. He cited the following increases: operating costs were up 17%. Fuel costs were up 36%; maintenance 32%; navigation, landing and parking 18%; employee expenses 7%; aircraft leases 7%; and other operating costs 4%.
Gigaba aired his concern about SAA’s reported irregular expenditure of R128 million, saying it reflected weak internal control. The airline also reported R4 million in losses due to wasteful expenditure, of which R3 million went into baggage claims.
Loss making routes, such as SAA’s recently launched Beijing service, would need more investment and capital, Gigaba said. He said systems needed to be streamlined and red tape procedures removed, in order for the airline to be able to make important decisions and take action without delay.
A stringent time frame has been given to the new board and task team, including newly-appointed SAA chairman Vuyisile Kona, as well as the CEOs of SA Express and Mango, to draw up a turnaround strategy. They are expected to report back to the Minister by December 15 and a new CEO has to be appointed within the next three months.
The turnaround strategy is conditional to the R5bn guarantee loan government has committed to assisting the national carrier.
Gigaba also confirmed that there were no plans to privatise the airline, which would result in massive job losses
The Minister also noted that executive and non-executive board members would not be receiving an increase for the year 2012/2013.