Oct 15, 2012
Gigaba hints to yet more SAA support, but wants new plan firstBack
Cutting|Efficiency|Flow|Mango|Public Enterprises|Road|South African Airways|South African Express|transport|Airline|Flow|Route Network|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
To subscribe email email@example.com or click here
To advertise email firstname.lastname@example.org or click here
Other Economy News
Recent Research Reports
Construction 2016: A review of South Africa's construction industry (PDF Report)
Creamer Media’s Construction 2016 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; key participants; local demand; geographic diversification; corporate activity; black economic...
Energy Roundup – February 2016 (PDF Report)
The February 2016 roundup covers activities across South Africa for December 2015 and January 2016 and includes details of a Government Gazette notice that confirms Cabinet’s decision to move ahead with the 9 600 MW nuclear procurement programme; State-owned power...
Energy Roundup - December 2015 (PDF Report)
The December 2015 roundup includes details of State-owned utility Eskom’s application to claw back R22.8-billion; South Africa’s ranking as an investment destination for renewable energy; and a nuclear expert’s thoughts on reactor designs for South Africa’s nuclear...
Water 2015: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2015 Report considers the aforementioned issues, not only in the South African context but also in the African and global context in terms of supply and demand, water stress and insecurity, and access to water and sanitation, besides others.
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
This Week's Magazine
Lifting, transporting, installing and ballasting solutions provider Ale has expanded its global fleet of trailers and invested in the latest range of widening trailers that can be mechanically widened from 3 m to the desired width for any project. Ale ordered 48 axle...
The market for the BMW 7 Series in South Africa differs quite significantly from the rest of the world. China, the US and the Middle East almost exclusively buy the long-wheel-base version, using the German manufacturer’s luxury high-end sedan as a chaffeur-driven...
January new-vehicle sales fell by 6.9%, to 48 615 units, compared with the same month last year. Statistics released by the Department of Trade and Industry show that the domestic new passenger-car market declined by 6.1%, to 34 936 units, compared with 12 months ago.
Information technology (IT) equipment and infrastructure multinational Dell is providing open infrastructure systems for clients so that they can use any systems, including innovative new systems, that suit their business needs, says Dell Europe, Middle East and...
South Africa’s State-owned defence industrial group, Denel, has set up another international partnership, based in Hong Kong. This new subsidiary is Denel Asia and it is a joint venture (JV) with South African private sector company VR Laser.