SAA has ambitious expansion plans - can it afford this?

South African Airways (SAA) is set to increase its number of destinations, and boost its number of aircraft.

The airline plans to add nine destinations from Johannesburg, and hike its fleet by 50% to 21 by March 2025, CEO John Lamola told Bloomberg during a television interview.

Lamola described SAA as being in a rebuilding phase following the COVID pandemic, with the aim of remodelling it into being a 'sizeable airline' that will fulfill the strategic transport needs of South Africa.

"As is known, SAA went through peculiar financial challenges leading to business rescue, so we are rebuilding it on a new premise and philosophy whereby cost air management is prime and whereby we are no longer dependent on the fiscus for support..."

"We are fortunate in that we have able to have a positive EBITDA, we are cash positive as a company, we are able in the coming 12-18 months to survive on our own."

John Lamola, CEO - SAA

Ray White interviews Guy Leitch, editor of SA Flyer Magazine, and asks him whether this plan sounds realistic for an airline that has battled for so long.

RELATED: SAA is ‘growing rapidly’ after years of struggles

Leitch says he doesn't in fact expect SAA  to get new planes unless they get a new strategic equity partner.

They might get new old planes, he says, and actually are trying to get a lot of their old fleet back.

Leitch highlights two factors when it comes to judging whether SAA can in fact afford this expansion plan.

"A, they say they're operating profitably, although that doesn't mean it flows all the way through to the bottom line."

"And, B, they had  2 billion rand's worth of operating money, capital given to them in terms of their startup budget by the State - I don't know whether they've burned through that, so it gives them some decent money."

"Lamola also told me a week or so ago that they can easily get another billion rand from the banks just on the strength of their property portfolio which is worth R6 billion, so they're not completely short of money."

Guy Leitch, Editor - SA Flyer Magazine

At the same time we need to understand that new airliners are terrifically expensive, Leitch emphasizes.

"Even getting together R3b or R4b in terms of assets hardly buys them an airliner." 

Guy Leitch, Editor - SA Flyer Magazine

Scroll to the audio player to listen to the interview, and click here to watch Bloomberg's interview with Lamola