Taxpayer relief? SAA urgently seeks investment partner

JOHANNESBURG — In his strategic review newly instated South Africa Airways CEO Vuyani Jarana said in order to keep the airline in the skies, it would need a further R21 billion by 2021, by which time it ‘should’ break even. A number available now for a private-sector partner, following the national carriers statement that it is urgently searching for an investor. And while taxpayer coffers are running dry, it seems the move was ignited by a business rescue application by Solidarity. The application has since been withdrawn but can be reinstated if the process is halted. At one point last year the airline was losing R12m per day but JSE-listed Comair shows that profitability over an extended period is a reality, given its unbroken record of profit since inception 71 years ago, last reported in February. So while Jarana tries to seal further losses at the state owned airline, it would take a brave private-sector player to shoulder such losses up front with break even only expected in three years time. – Stuart Lowman

By John Bowker

(Bloomberg) – South African Airways pledged to urgently begin a search for a private-sector partner to help turn around the troubled state-owned carrier and ease the burden on an already stretched National Treasury.

The assurance followed an attempt by the Solidarity union to end SAA’s reliance on state funding and push the airline into business rescue. The carrier hasn’t made a profit since 2011 and last year needed a bailout to avoid a default on borrowings.

“The reality is that there is pressure to find funding solutions for SAA,” spokesman Tlali Tlali said in an emailed response to questions. “For that reason, there is a decision to commence, as soon as possible, a process for a strategic equity partner.”

South African Airways (SAA)

An investor or aviation partner has long been mooted as the answer to SAA’s financial crisis, though no candidates have yet come forward. Chief Executive Officer Vuyani Jarana said in April that the government was in talks with a private-equity firm, while the previous month he said the company’s balance sheet will need to be repaired before a new party could be introduced.

Satisfied with an undertaking by Jarana to seek outside help, Solidarity has withdrawn the business-rescue application, the union said in an emailed statement Tuesday. The labour group reserves the right to refile should the promises not be implemented.

The application runs to more than 1,000 pages and counts two former SAA CEOs, Nico Bezuidenhout and Monwabisi Kalawe, as contributors, the union said. Jarana took the helm in November, the seventh head of the airline since the start of the decade.

SAA last month fired its previous CEO and ex-chief financial officer for misconduct. Under their leadership, the airline failed to properly value assets or correctly record irregular or wasteful expenditure, according to an Auditor General report released earlier this year.

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