South Africans Airways (SAA) says it has secured the R3.5-billion loan it needed to keep operating until the end of the financial year in March, providing a temporary relief for the cash-strapped airline.
The loss-making flag carrier, which is battling cash flow challenges, is implementing a three-year turnaround strategy, and has said it needs a total of R21.7-billion in loans over the same period.
SAA Spokesperson Tlali Tlali told Fin24 on Tuesday that the R3.5-billion, which has been secured from local lenders, was part of the R21.7-billion funding requirement.
"The airline, working jointly with the shareholder were able to secure an undertaking from local lenders to make available the amount of R3.5-billion to SAA," said Tlali.
He said the funds would enable the airline to operate up to the end of the financial year in March. In October, the National Treasury allocated R5-billion to SAA, as announced during the medium-term budget policy statement.
The funds were directed at debt repayment.
Tlali stated that there was no expectation that SAA was going to become profitable before 2021, stressing that plans were underway to steer the airline out of its financial quagmire.
"We are working towards the goal of becoming profitable by the 2021, there is no plan of shifting the goal post,"he said.
In need of funds
SAA interim chief financial officer, Deon Fredericks, revealed in November 2018 that the national carrier needed to raise R3.5-billion by March, as it battles operational and financial challenges.
Briefing the portfolio committee on public enterprises, Fredericks said the airline expects to incur losses of R5.2-billion in the 2018-19 financial year and R1.9-billion in the 2019-20 financial year, after reporting a net loss of R5.7-billion in the 2017-18 financial year.
Plans to turn around the flag carrier included the implementation of capacity adjustment in the domestic market and network optimization in the regional and international markets.
Tlali said on Tuesday that some of the key loss-making routes included the Johannesburg to London link which has been “bleeding cash” due to stiff competition, as well as the connection between Johannesburg and Entebbe, in Uganda.
On the domestic front, the route between Johannesburg and Port Elizabeth was not performing well.
The airline’s Chief Executive Officer Vuyani Jarana, who was appointed in August 2017, and the new board, have been working to stabilise the financial situation of the company which has been battered by mismanagement, and has been a recipient of numerous government backed loans and guarantees.