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Loubser: Govt must support SAA

Oct 17 2012 16:10 Sapa

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Johannesburg - If government wants to own an airline it needs to support it financially, former JSE CEO and SA Airways board member Russell Loubser said on Wednesday.

"If you don't like the airline industry why [have] you got three?" he asked of government.

Government, through the department of public enterprises, is the sole shareholder in SAA and SA Express. SAA fully owns Mango Airlines.

"But seeing you've got three, why are you not supporting them 100% in every possible way, morally, and especially financially?"

Loubser was addressing students at Wits University in Johannesburg.

He was among the SAA board members -- including chairperson Cheryl Carolus -- who unexpectedly quit last month before the annual general meeting when their term was due to end.

The AGM was held on Monday at which it reported a R1.3bn operating loss for the year ended March 31.

SAA CFO Wolf Meyer said the airline's losses over the past decade amounted to R14.7bn.

In early October, the National Treasury announced that SAA had been given a R5bn government guarantee to recapitalise. This would enable it to borrow from financial markets and buy new aircraft.

However, Loubser said this guarantee would not help the struggling airline.

"Will a R5bn guarantee help? No. A guarantee's not cash. It [SAA] has never been capitalised properly."

He said SAA was "an extremely difficult business" with a turnover of around R23bn but only a 2% profit margin.

"So in a good year when nothing goes wrong, [SAA would make] round about R400m profit. That's what the JSE made with a billion rand turnover."

He said a third of input costs were fuel -- about R8bn -- and if the price of oil spikes from R90 a barrel to R115, that amounts to fuel costs of around R800m.

"And double your margin is gone."

Loubser said it was easy for other airline companies to compete with SAA, unlike other parastatals, such as Eskom or Transnet.

"If you're not properly capitalised... you do nothing wrong but the oil price turns against you, and you've got no hope," he said.
saa  |  sa express  |  russell loubser  |  government
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