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Pretoria – Loss-making national airline, South African Airways (SAA), will need to receive another cash injection, says Treasury.
Speaking to media prior to his Budget Speech on Wednesday, Finance Minister Pravin Gordhan said he had met with new board members of the airline to chart the way forward.
Gordhan said that there will also be a need for further cash injections into the airline, but that this would be done so as not to jeopardise government spending.
Elaborating further on SAA, Treasury director general Lungisa Fuzile said that “SAA definitely needs a capital injection” and that the exact amount would be determined by October this year.
“The first cash injection will be in the financial year that is coming,” said Fuzile.
“In the current environment it will have to be in instalments over time,” he added.
He also said that Treasury would have to make sure that the “amount is financed in a deficit neutral way”.
Even though Gordhan said that the chairperson of the board Dudu Myeni was absent from the meeting, he said that “the new board members have got a good grip on the airline”.
Issues facing the airline include the need to find a new chief executive officer and chief financial officer, said Gordhan.
SAA ‘technically insolvent’
Meanwhile Treasury, in its Budget Review document for 2017, provided more detail on SAA’s financial situation.
“SAA pared its losses from R5.6bn in 2014/15 to R1.5bn in 2015/16. The improvement resulted mainly from lower fuel prices and lower asset impairments,” said Treasury in the document.
“However, the carrier remains technically insolvent. Its going-concern status depends on state guarantees totalling R19.1bn. Government continues to help SAA secure funding with its existing lenders," Treasury noted.
Treasury further said the new board, which was appointed in September 2016, finalised the 2014/15 and 2015/16 annual financial statements as required by law.
The board is further finalising the recruitment process for a new CEO and CFO and is set to submit this process to government for approval.
Treasury added that SAA’s liquidity constraints are expected to persist over the medium term and that government seeks to work with the board to reduce these risks.
Subsequently, it’s hoping that the financial support will help with the airline’s turnaround bid.
“The support will strengthen the new board’s ability to effect a comprehensive turnaround strategy that allows SAA to function on a financially sustainable basis,” said Treasury.
“Advisors are assisting government with a review of the state’s aviation assets. The review is expected to be complete by the end of March 2017. The goal is to develop a stronger, more efficient and sustainable state aviation sector.
“The possibility of merging SAA with South African Express, and introducing a strategic equity partner, will be considered,” said Treasury.
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