SAA CEO suggests business rescue will bring little benefit to airline
South African Airways (SAA) CEO Vuyani Jarana is of the opinion that placing the airline under business rescue would not lead to a radically different recovery plan for the deeply indebted and heavy loss-making national carrier. He was answering a question from FlightComm editor and aviation expert Guy Leitch at the twenty-seventh African Aviation Summit (Air Finance Africa) in Sandton, north of Johannesburg, on Wednesday.
"Even during a time of business rescue, you still have to find the business," pointed out Jarana. "The government would still have to fund it."
"I think I can comfortably say we [the new SAA board and management] have no legacy to protect," he noted. "We've looked at it [SAA] with fresh eyes." They had a duty to advise the shareholder (the government) about the best way forward for the business. They believed that rebuilding SAA was a viable option.
"The [recovery] plan, we believe, will stand. It is fit for the future." A business rescue practitioner would have only one advantage over the current SAA management, Jarana affirmed: he or she would have more freedom to make hard decisions, without getting various clearances from the shareholder.
"We're quite comfortable that it [the recovery plan] is executable," he assured. If the government liked the plan, it would have to fund it. "We're going to have to work to make certain the airline is viable."
The current financial model of SAA was not sustainable. Among other things, the government needed to look at the level of debt in the company and the level of equity that would have to be put into it. "We have a joint oversight committee, with the shareholder, so the shareholder understands the funding requirements of SAA ... what it would take to make SAA work ... we've been very transparent," he explained.
African Aviation Services CEO Nick Fadugba asked Jarana how much freedom he had as SAA CEO. "I think we've got a very good board," he replied. "But also it's important that we're all at SAA out of choice. We're able to hold each other accountable and keep each other in check. ... We're quite comfortable we have the support of the shareholder." He affirmed that the new leadership of the company had the leeway to transform the airline and assured that they had not received any phone calls from any politicians so far.
Fadugba also asked Jarana if he had found the situation of SAA worse than he had expected. "In many ways, yes," he responded, "but not in a surprising manner. It's not just a cost exercise." A lot had to be done regarding the number of the airline's customers, on customer segmentation and service optimisation. "The good thing about SAA is that SAA is a good airline. It's solid. A good airline [good safety record, good quality staff] but a bad business."
The new management was looking to make SAA fit for growth. And once it was fit, it would grow, he assured. "We know we're going to grow."
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