SAA turnaround strategy 'questionable'
A transport economist has cast doubt over SAA’s current long-term turnaround strategy.
CAPE TOWN - A transport economist says it is unfair that government has to bail out South African Airways (SAA) every time it is in a tight corner.
In the past 13 years, the national airline has received about R16 billion of taxpayers' money with nine turnaround strategies which have all failed.
In 2013, SAA received an emergency bailout from government to cover short-term fuel costs to prevent the potential grounding of its local and international flights.
Transport economist Dr Joachim Vermooten told the Redi Tlhabi Show that government could use that money for other things.
"There are many other government needs like housing, sanitation, education, schools and healthcare. To compare that by flying around with empty seats or not recovering your costs is quite a difference in approach."
The last turnaround strategy which will be implemented over a 12-year period was announced last September.
It is aimed to allow the airline to consolidate its routes and update its fleet.
However, Vermooten says the current long-term turnaround strategy is questionable.
"On the current long-term turnaround strategy, very little has been published. And what has been published is questionable. It doesn't deal with all the elements that one normally expects a turnaround strategy to contain. Also the time span is too long."
He says at one stage SAA was doing very well.
"If one looks at the previous restructuring programmes, there was actually one that was successful, that's from 2008 to 2009. It actually sorted out SAA finances and it ended up with a healthy balance of something like R3.4 billion cash."
He says, however, after that things went pear shaped once again.
"If one looks at SAA's press release on their finances for the year ending on March 2013, their further increase in cost of R2.9 billion, they only recovered by R1.6 billion so there's another deficit of R1.3 billion by not charging their customers what they should."
He says the industry is tough and one needs to adjust quickly.
"One has to remember that it's not a static type of business. It's a very volatile business where your cost factors and demand factors and comparative situation change very drastically and you should be agile to adjust for that otherwise you will make losses."
He says SAA needs to cut down on international and domestic services so that it can adjust its costs.