There's a new 'investment case' for SAA, insists Gordhan
“We have been working on a new investment case, if you can call it that, for SAA – in order that we prepare the airline for a partnership with a strategic equity partner.”
JOHANNESBURG - Public Enterprises Minister Pravin Gordhan on Tuesday gave 11,000 South African Airways employees some hope. But for the good news, the company must change its "culture of entitlement".
He addressed ministers and Members of Parliament while taking part in the debate on President Cyril Ramaphosa’s State of the Nation Address, which took place on Thursday.
Gordhan said that based on comparisons with other airlines, there was indeed an investment case for SAA, but "if reforms are well implemented and if inefficiencies in its systems are eradicated".
“We have been working on a new investment case, if you can call it that, for SAA – in order that we prepare the airline for a partnership with a strategic equity partner,” he said.
But for it to work, Gordhan said, the airline must apply urgent changes. The Public Enterprises Ministry would also be involved in helping implement the changes.
"SAA is required to appoint appropriate local and global commercial and aviation skills. It must change the culture of entitlement, embed accountability, streamline approval processes, secure funding and ensure an accelerated implementation plan."
SAA borrowed R3,5 billion on top of a R14 billion initial loan. Of that, R9 billion as well as the R3,5 billion was due to be paid by the end of March 2019. The airline has had bailouts of over R15 billion in the last two years.
"We are in the process of strengthening the company executive and the board to ensure stability in the organisation. A joint implementation committee has been established between management, the board and my department to accelerate implementation, accountability and enable quick decision making.".
He also said that by 8 July, the company would have a new turnaround strategy developed for approval.
Gordhan said SAA was in a dangerous financial situation due to a commercially unsustainable cost structure, incorrect fleet configurations and "cumbersome approval processes".
"The airline has persistently incurred losses over the past 12 years due to mismanagement, state capture, its inability to service its debt," he said.
Gordhan said there was a "long term turnaround strategy" (long term turnaround strategy) from 2017 to help transform the national airline.
"Progress was made with route optimisation and other cost efficiencies. But ultimately, we need to create an airline that is ‘fit for purpose’ and able to compete effectively in a dynamic market and ready to negotiate with a strategic equity partner," he said.