Expect forensic investigations and consequences at SAA - chair | Fin24
 
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Expect forensic investigations and consequences at SAA - chair

Nov 30 2017 07:30
Carin Smith

Cape Town – Expect forensic investigations at South African Airways (SAA) and consequences if any foul play is uncovered, new board chair JB Magwaza assured Parliament's standing committee on finance on Wednesday.

He was part of a delegation, including new CEO Vuyani Jarana, who briefed the committee on the state of the airline.  

Jarana told the committee his aim is to ensure SAA operates in a sustainable way.

"We now have aviation experience on the board - the lack of which people have complained about in the past," said Jarana.

In response, committee chair Yunus Carrim said SAA's management and board are in an "unenviable situation" and must use all the expertise it can get. Carrim said the committee still feels there should be one or two more SAA board members appointed with expertise specifically in managing an airline.

In his presentation Jarana emphasised that SAA has "material relevance" to the economy.

"It is not a case where we could imagine that SAA would just disappear. It has revenues of R30bn, moves 110 905 tonnes of cargo, 10.1 million passengers and has 10 669 employees. We must just ensure it is operated on a sustainable basis," explained Jarana. He added that it is important to note that 15% of South Africa's global connectivity is still via SAA.

He said in the past a "lack of stability" undermined the execution of strategies for the airline.

"SAA is not short on strategies. There is consistency in what needs to be done, but it had a lack of stability in leadership," said Jarana.

He pointed out that from about 2012 the airline started to make losses on a consistent basis.

"When that happens, it means you then need to rely on someone else to sustain you. It is not wrong to borrow money if it is merely part of a cyclical [trend], but you cannot keep doing it. We will, therefore, put together a very strong plan to get SAA out of this situation and make sure it is sustainable," said Jarana.

In his view, what trips SAA up is that it is over geared and finance costs are causing additional strain on profitability. He feels there is also an over reliance on leasing aircraft. Furthermore, increased domestic and international competition is driving margins down and not all the airline's routes are profitable. There is also a shift in SA's domestic market towards low-cost airlines.

Other challenges include the ageing fleet and poor fleet profile, which increase operational cost, and the airline's high cost structure.

Committee members Pinky Kekana (ANC) and Dikeledi Mahlangu (ANC) called for transformation to be a big focus at SAA, including among pilots.

"A lot has been said about the old pilots and that they are too costly. Tomorrow they can all say they are not flying today so what will SAA then fall back on? There must be a plan. Our national carrier is our pride," said Kekana.

Mahlangu asked for SAA to present a transformation plan, which the committee can evaluate. She also called for members of Parliament to utilise the national carrier as, in her view, the majority of MPs still prefer other airlines. She would also like to see SAA treating its customers like VIPs - the way she feels some other airlines do.

Carrim added that transformation should be embedded in SAA's strategy "in the fullest sense as used by the ANC government".

At the end of the briefing, Carrim and some of the other committee members remarked on the difference in tone of the meeting with the new SAA representatives compared to the past.

"It is like a breath of fresh air. We are not seeing the evasiveness we have seen in the past," said Carrim.

"Thanks for not trying to confuse us," added Lees.

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saa  |  yunus carrim  |  jb magwaza  |  aviation  |  transport  |  airlines
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