National carrier South African Airways (SAA) has drawn R8.3-billion of the R14.4-billion in guarantees extended to it by government, Finance Minister Nhlanhla Nene revealed on Wednesday
He said government had stepped in to address the financial position of the airline, which reported a net loss of R2.6-billion in 2013/14, as a result of high operating costs, losses on several international routes and valuation adjustments.
As with other State-owned companies, any additional support would be premised on SAA having a sustainable turnaround plan, with any further fiscal support to be financed “through offsetting asset sales so that there is no net impact on the budget deficit”.
“Measures to achieve operational efficiencies and restore profitability are now in progress,” Nene, who took over direct shareholder responsibility for the national carrier in December, averred.
The associated Budget Review document made specific reference to the 90-day action plan instituted to contain losses, adding that the plan had already produced several results.
SAA confirmed recently that some R600-million in yearly savings would arise from the decision to cull lossmaking services to Beijing, China, and Mumbai, India, as from the end of March.
The cessation of the long-haul routes, together with impending changes to SAA’s North American services, would also make up the lion’s share of R1.25-billion in sustainable savings currently being sought.
A Long-Term Turnaround Strategy, aimed at overhauling of its financial, network, fleet and operational model, was being revalidated and would kick in at the end of the 90-day action plan, which was premised on safeguarding SAA’s immediate going-concern status.