South African Airways (SAA), the country’s State-owned flag carrier, does not think that it will need any more State financial guarantees to ensure its liquidity. This was reported by SAA acting CEO Nico Bezuidenhout at a media briefing at the company’s head office, in Kempton Park, east of Johannesburg, on Tuesday. “It is unlikely that SAA will require any further government guarantees for the purposes of liquidity,” he reported. “For solvency purposes – I don’t know. But, in the short term, things are looking better for SAA. For [guarantees for] solvency purposes – the calculations are [currently] being done.”

SAA also hopes to be profitable in Ebitda (earnings before interest, taxes, depreciation and amortisation) terms within four years.  Provided, he noted, that it made the tough choices it needed to make and had the support of its shareholder (the government, in the form of National Treasury).

“Bottom line profitability will require very hard decisions,” he stated. “It would require certain hard decisions on the part of SAA, given that we have this massive interest burden. Our interest burden is [equivalent to] 20% of [South African private sector airline group] Comair’s turnover!”

During the first few months of this financial year, which started on April 1, SAA saw its operating costs cut by 14% in relation to the same period in 2014, with unit costs down 7% and 10% below budget. These results were partly caused by the fall in fuel prices. Unfortunately, falls in the oil price are being countered by the decline in the rand exchange rate with the dollar. “We continue focusing on cost reduction,” he said.

“We started the new year with a keen focus on implementation,” assured Bezuidenhout. “SAA has increased its passenger volumes by about 6%. We’re ... selling more of our available seats. On the [low-cost carrier subsidiary] Mango side, the business remains profitable.”

“On the international [business] side, no major changes are to be expected in the short and medium term,” he stated. This follows the termination of the routes to Beijing, in China, and Mumbai, in India, and the announcement of a new route from Johannesburg to Washington DC via Accra, in Ghana (with a concomitant reduction in the number of flights from Johannesburg to Washington via Dakar, in Senegal).

The company hopes to complete its “head count restructuring” in September. He added that consultations with the unions were under way and that it looked like SAA would be able to cut its staff complement by between 8% and 10% and be able to do this without resorting to retrenchments, relying on natural attrition, early retirements and voluntary departures instead. He saluted the frontline SAA staff for maintaining high standards of service despite the uncertainties and stresses caused by the planned reductions.

“We continue to focus on governance in the business,” he affirmed. This focus on ensuring efficient and honest management has seen the company undertake serious internal disciplinary actions. “The next point of focus will be performance management.” While SAA flight crews have always had to meet professional performance standards, this has not been the case for managers. Bezuidenhout is seeking to change this, including introducing a system of “more performance driven” renumeration (as is already the case in Mango.)

“We’re not out of the woods yet,” pointed out Bezuidenhout. “There is an upward trend. We see a profitability trend in every line of the business.”