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Gigaba: SAA will get support into Africa

May 16 2012 18:05 Sapa

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Cape Town - The government will give financial support to South African Airways (SAA) as it expands into Africa, Public Enterprises Minister Malusi Gigaba said on Wednesday.

This was not a bailout, he told reporters before delivering his department's budget speech in parliament.

Gigaba said the point would come when SAA would have been "properly capitalised".

"It is our firm view that, given the current global environment, all airlines need shareholder support," he said.

"The dual challenge of a depressed global economy and high fuel prices means that shareholder support for SAA to procure a modern and fuel efficient fleet is vital if this company is to remain competitive."

Gigaba said the nature of the support was uncertain.

"Ultimately, we don't know what nature of support will be.

"It is not a bailout. SAA has not come to us and said we are in the red, help us out with money."

In February, SAA chief executive Siza Mzimela asked the government for "proper capitalisation" and insisted she was not asking for a bailout.

She said the airline had money, but needed to raise the necessary capital to renew its fleet to introduce a premium economy cabin, which was what passengers wanted, and to expand its business class cabin.

One problem was that SAA had been hit with an extra R2.6bn fuel bill.

Gigaba said his department, with SAA and SA Express, had drafted an aviation strategy aimed at focusing state-owned airlines on opportunities in Africa and on promoting regional integration.

Africa would constitute the primary market and routes in the future, he said.

"It is critical that South Africa should sustain a national flag carrier to assure security of air transport to our country," he said.

"The damage to business and tourism of unreliable air travel to South Africa will be immeasurable."

The department would, in due course, announce the full details of its support to SAA.

However, at this stage, it would be "grossly irresponsible" to throw around figures in public.

"We need new aircraft that are reliable and fuel efficient.

"We need to be competitive in comparison with our competitors and for us to be that competitive, we need to provide shareholder support to our national carrier and airlines."

"There will come a point when the shareholder will say SAA you have now been properly capitalised. You are on your own. We expect you to do things differently."

Gigaba said the route network and the aviation strategy by SAA and the department of transport had been inadequate in that it neglected the primary market, which was Africa.

Even if SAA was a private airline it would still require that shareholders provide support for it to change its strategies and increase its fleet.

"In this instance, it is the shareholder that is driving SAA in a new direction," he said.

"The expectation that we have is that the company will move towards that direction with our support and whether that support is monetary or spiritual it will be there."

One of the problems with SAA was that it had never had a long-term plan.

"We are truly sensitive to fact that we are asking fiscus to provide us this support," he said.

"The argument that fiscus must not do this is not an argument not worth entertaining."

malusi gigaba  |  expansion  |  africa  |  saa
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