Oct 15, 2012
Gigaba hints to yet more SAA support, but wants new plan firstBack
Flow|Mango|Public Enterprises|Road|South African Airways|South African Express|Airline|Flow|Route Network|Transport|Well-run Airline|Adam Seeda|Malusi Gigaba|Nico Bezuidenhout|Siza Mzimela|Vuyisile Kona
© Reuse this
The State-owned airline had, over a ten-year period, also received cumulative shareholder support of more than R15-billion to facilitate its survival and was recently granted a controversial R5-billion guarantee from the National Treasury to stave off immediate liquidity threats.
Gigaba hinted to yet further “shareholder support” on Monday, which could flow on the back of a “robust” plan that delivers financial independence, operational efficiency and a long-term strategy to “become a competitive and well-run airline”.
The “immediate” focus, though, would be on cost cutting and revenue enhancement measures to stabilise the business, whose 6% rise in revenue to R23.9-billion in 2011/12 was more than offset by a 17% rise in operating costs to R25.2-billion. The “cash burn” was so intense during the year that the airline’s cash and cash equivalents fell from R2.3-billion in the previous financial year to a negative R33-million by the end of March, 2012.
However, the business model, structure and strategy would also be reviewed by a Ministerial task team led by SAA’s current executive chairperson Vuyisile Kona, the chairperson and the CEO of South African Express respectively, Andile Mabizela and Inati Ntshanga, Mango CEO Nico Bezuidenhout and acting deputy director-general for transport enterprises at the Department of Public Enterprises, Adam Seedat.
The task team would provide the Minister with “a consolidated view on the critical success factors for the turnaround”, as a well as a turnaround plan.
The plan would have to show how SAA could be made independent of government support over the medium term; outline a route network and fleet plan that ensured earnings made domestically and regionally were not “rubbished” by losses associated with long-haul routes; and incorporate safeguards against exogenous shocks, such as the rise in fuel costs. In 2011/12, fuel costs rose 36% from R6.1-billion to R8.3-billion.
The task team would also interrogate bottlenecks in the decision-making processes at the level of the shareholder, particularly where these impeded flexibility and the implementation of decisions that were urgent for the commercial viability of the airline.
Gigaba indicated that he was sensitive to a possible “blurring” of roles between the shareholder, the board and the executive and said he was studying a board-led submission to him on how to mitigate that risk.
Deadlines for both the finalisation of the turnaround plan and the selection of a new CEO, following the October 8 resignation of Siza Mzimela, were held up as key to ensuring that the roles were not distorted.
The new SAA board would need to complete the selection and recruitment of a new CEO within three months.
Agreement had also been obtained from the remaining executives that there would be an increase in remuneration packages for the foreseeable future.
“I am determined to see to it that SAA gets on the path towards recovery. We do not have the luxury to fail and I shall, hence, brook no indecision on anybody’s part,” Gigaba stressed.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Aviation News
Article contains comments
Updated 4 hours ago The Labour Court in Johannesburg has set aside the 2011-2014 metal sector wage agreement, the National Employers' Association of SA (Neasa) said on Thursday. The 2011-2014 wage deal was the result of an agreement between the Steel and Engineering Industries...
Recent Research Reports
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
This Week's Magazine
South Africa remains an important manufacturing and export platform for Ford Motor Company, says executive chairperson Bill Ford. However, he adds that other countries on the continent are “becoming interesting”, and that the US carmaker is casting its net wider for...
Germany’s Max-Planck-Society (MPG) and the Max-Planck-Institute for Radio Astronomy (MPlfR) are investing €11-million (about R150-million) into South Africa’s MeerKAT radio telescope array programme. The money will be used to design, build and install S-band radio...
Infrastructure spend in sub-Saharan Africa will grow from $70-billion in 2013 to $180-billion by 2025, says PwC capital projects and infrastructure Africa leader Jonathan Cawood. This is one of the findings of PwC’s Capital Projects & Infrastructure report on East...
Private-owned defence and aerospace manufacturer Paramount Group and the Ichikowitz Family Foundation unveiled its Anti-Poaching Skills and K9 Training Academy in Magaliesburg last month.
The inclusion of Bluetooth to provide sub-three meter accuracy and heightened functionality for users is one of the ways to change existing wireless networks into engagement networks. An engagement network differs from common wireless networks in that it enables the...