'Dire' SA Express to resume Cape Town routes as part of financial turnaround | Fin24
 
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'Dire' SA Express to resume Cape Town routes as part of financial turnaround

Jan 11 2019 12:52
Sibongile Khumalo, Fin24

The state-owned SA Express will this weekend re-open its Cape Town and Walvis Bay routes as the financially troubled airline, which was grounded last year, embarks on a path towards sustainability. 

The regional airline was in May 2018 hit by operational challenges when the Civil Aviation Authority suspended its aircraft operator’s licence for about two months and grounded nine of its 21 aircraft.

Spokesperson Madikwe Mabotha said on Friday flights from Cape Town to Bloemfontein and Cape Town to Walvis Bay will resume this weekend.

“This is part of our strategy of returning to financial sustainability after coming out of being grounded by the authorities last year. We are slowly re-launching the routes, and so far, eight routes are operational,” said Mabotha.

The airline, which has experienced severe liquidity and operational challenges, was last year granted a R1.2bn government guarantee. Mabotha said the guarantee enabled it to secure a R400m loan to help stabilise operations.

“The funds have allowed us to service some of our current financial requirements and service debt. The airline’s financial position has been very dire, but measures have been put in place to put us back on the path to recovery, including the implementation of our turnaround plan, ” said Mabotha.

“As a result, we expect to break even by the end of this financial year. The goal is to become financially sustainable and limit our reliance on the shareholder,” he added.

Mabotha said the loan came with stringent requirements, including a clear demonstration to turnaround its financial woes. Briefing Parliament’s portfolio committee on public enterprises in May, the airline said banks were no longer committed to supporting it unless it could demonstrate a clear turnaround plan, supported by government funding.

The airline also revealed that it had incurred R42m in fruitless and wasteful expenditure, as a result of penalties for late payments and interest charged on invoices. Its irregular expenditure amounted to R408m, due to employees not adhering to procurement processes.

Mabotha further stated that part of the intervention to stem financial losses included the closure of Durban and George, which was not profitable. The airline is also phasing out its Richards Bay link. 

In August, the board of the state-owned airline appointed Siza Mzimela as acting chief executive, as part of sweeping changes aimed reviving the company.

sa express  |  airline industry
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