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Oct 17, 2012

Govt must support SAA, says Loubser

Aircraft|Eskom|Mango Airlines|Public Enterprises|South African Airways|Transnet|Wits University|Airline|Airline Industry|Cheryl Carolus|Russell Loubser|Wolf Meyer

If government wants to own an airline it needs to support it financially, said Russell Loubser, former JSE CEO and South African Airways (SAA) board member, on Wednesday."If you don't like the airline industry why [have] you got three?" he asked of government.

Government, through the Department of Public Enterprises, is the sole shareholder in SAA and SA Express. SAA fully owns Mango Airlines.

"But seeing you've got three, why are you not supporting them 100% in every possible way, morally, and especially financially?"

Loubser was addressing students at Wits University in Johannesburg.

He was among the SAA board members – including chairwoman Cheryl Carolus – who unexpectedly quit last month before the annual general meeting when their term was due to end.

The AGM was held on Monday at which it reported a R1.3-billion operating loss for the year ended March 31.

SAA CFO Wolf Meyer said the airline's losses over the past decade amounted to R14.7-billion.

In early October, the National Treasury announced that SAA had been given a R5-billion government guarantee to recapitalise. This would enable it to borrow from financial markets and buy new aircraft.

However, Laubser said this guarantee would not help the struggling airline.

"Will a R5-billion guarantee help? No. A guarantee's not cash. It [SAA] has never been capitalised properly."

He said SAA was "an extremely difficult business" with a turnover of around R23-billion but only a two percent profit margin.

"So in a good year when nothing goes wrong, [SAA would make] round about R400-million profit. That's what the JSE made with a billion rand turnover."

He said a third of input costs were fuel – about R8-billion – and if the price of oil spikes from R90 a barrel to R115, that amounts to fuel costs of around R800-million.

"And double your margin is gone."

Loubser said it was easy for other airline companies to compete with SAA, unlike other parastatals, such as Eskom or Transnet.

"If you're not properly capitalised... you do nothing wrong but the oil price turns against you, and you've got no hope," he said.

Edited by: Sapa
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