Parliament’s Portfolio Committee on Public Enterprises has welcomed the turnaround strategy of State-owned regional carrier South African Express (SAX). This was reported in a media statement issued by the committee, following a briefing it received from the airline on its financial and operational situation. “The committee welcomed and congratulated SAX on its turnaround strategy and the austerity measures that have been introduced,” said the statement. “The committee said it was happy to see a turnaround strategy with this trajectory and was looking forward to more presentations.”

The airline has been in severe financial difficulties over the past few years. It lost R200-million in the 2011/12 financial year (FY) and had to be granted State guarantees of R539-million to keep operating. But the losses continued, coming to almost R314-million in FY 2012/13 and R206-million in FY 2013/14. Late last year, Public Enterprises Minister Lynne Brown stated that the airline was in an “extremely difficult financial position” and that “SAX is currently unable to demonstrate such ability [that is, to show it could function as a going concern] without government financial support”. In March, SAX received a further R539-million in State guarantees.

However, these guarantees where made conditional on the airline meeting strict requirements, including cutting costs very significantly. And, indeed, with its turnaround strategy, SAX is seeking to cut operating costs, increase revenues, strengthen internal controls and corporate governance and modernise its fleet.

In its briefing, SAX told the committee that the turnaround programme was beginning to produce results. After three quarters of losses during the FY 2014/15, the fourth quarter had seen the airline achieve a profit. “We were able to show a profit of R6-million [in that quarter],” airline CEO Inati Ntshanga reported to the Parliamentarians. “We bought the operating costs down by close to R90-million, so we believe the austerity measures are working.” The company’s debt had been cut from R569-million in September last year to R378-million last month, a reduction of 33.6%.

Part of the austerity programme is staff restructuring, although the company is trying to avoid retrenchments. “We are working with our people to make sure we find other ways of becoming profitable without taking away jobs,” he stated.

Challenges facing SAX including increasing costs – for fuel, labour and aircraft leases – and increasing competition from low-cost carriers (LCCs, one of which is State-owned). The LCCs are driving down fares, putting “pressure on operations” and so “affecting profitability”, he affirmed.

Currently, SAX operates an all-Canadian fleet of 24 aircraft, comprising ten Bombardier CRJ200 and four Bombardier CRJ700 jets and ten Bombardier Q400 turboprops. The CRJ200s can each carry 50 passengers and have a range of 1 000 nautical miles (nm). The CRJ700s have a passenger capacity of 70 each and a range of 1 434 nm. The Q400s have the biggest capacity of the SAX fleet, at 74 seats each, but the shortest range, at 950 nm.

“In its engagement, members of the commmittee pleaded with SAX that proper procurement processes should be followed and implemented when acquisition of new-generation aircraft got under way,” it affirmed in its media statement.

The committee also expressed concern at the fact that three South African State-owned airlines were in competition with each other. These are SAX, South African Airways (SAA) and LCC Mango. (Mango is part of the SAA group; SAX is not.) “The Department of Public Enterprises said that the matter was being handled and that an interdepartmental task team had been set up to address the issue,” reported the statement.