Mon, Feb 03, 2014 - Page 6 News List

Struggling SAA turns to state again for survival


Hapless and helpless, South Africa’s struggling national carrier awaits news on a state cash injection vital to stay in the skies, but which shows up its inability to make money.

Eighty years after its creation, loss-making South African Airways (SAA) battles with an aging fleet and a weak national currency.

“It’s not a secret that our balance sheet is very weak,” chief financial officer Wolf Meyer said.

“There are currently discussions with the national Treasury, we hope that we get good news soon on the capitalization,” he said.

State intervention is key to SAA’s survival and South African Finance Minister Pravin Gordhan is expected to shed more light on saving the airline during his annual budget speech in parliament this month. In the meantime, the government has extended a two-year guarantee of 5 million rands (US$444 million) issued in 2012 in exchange for a vast restructuring.

When that guarantee was first approved, irate opposition parties accused the government of wasting taxpayer money, while some companies said it was distorting the market.

A year-and-a-half later the turn-around strategy still has not been implemented and main opposition party the Democratic Alliance has renewed its call to privatize the carrier.

On Wednesday last week, SAA reported improved results for the financial year that ended last year, but the situation remains bleak. Though better than the 1.3 billion rand loss a year before, the 991 million rand operating loss was still a glaring indicator of existing problems.

Despite the losses, the 13.5 percent increase in revenues indicates market potential even in the face of aggressive competition from companies based in the Gulf.

However, the company warned of rising fuel costs and the rand’s slide against the US dollar, which ate into earnings.

In the domestic market, low-cost subsidiary Mango cashed in on two competitors going out of business.

On the international front, SAA, which is member of the Star Alliance group, is building a name for itself, Meyer said.

“We are very proud of our Africa growth strategy, it’s really working well,” he said.

Air traffic across the continent is soaring and SAA has toiled to build from its traditional European routes, though with mixed success.

“Buenos Aires route was loss-making, and the Cape Town-London, and the Beijing route, and the Bujumbura route were also loss-making routes,” Meyer said.

Accordingly, some flights will be axed, like the Argentina route next month.

Others, especially when diplomatic interests are at stake, will survive. Ever anxious about relations with its main trading partner, China, the government has insisted to keep the Beijing route open.

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