You are currently viewing our desktop site, do you want to visit our Mobile web app instead?
 Registered users can save articles to their personal articles list. Login here or sign up here

SAA rescue supremo faces long to-do list

Les Matuson appointed as business rescue practitioner.

South Africa’s government has hired a veteran business-rescue specialist to take charge of the state-owned airline in a renewed attempt to restore it to financial health and remove a burden on the nation’s finances.

Les Matuson and his team at Johannesburg-based Matuson & Associates will get R4 billion in working capital from creditors and the government to keep South African Airways operating into 2020 — a move aimed at assuring passengers that their flights over the busy year-end season will take off as planned.

These are some of the most pressing issues facing SAA’s temporary managers:

Rationalise Routes

The scaling back of SAA’s global network has been a fixture of previous restructuring plans drawn up to ease debt and stem persistent losses, which amount to more than R28 billion over 13 years. Some routes have already been cut, such as those from Johannesburg to Mumbai and the Nigerian capital Abuja, but more drastic action is required, according to Mike Mabasa, chairman of the Air Services Licensing Council.

“Route rationalisation must be top of the agenda,” he said by phone. “SAA is bleeding cash on some routes — they are not able to get bums on seats.”

Cuts should primarily come from destinations outside Africa that are already well serviced by rivals such as Emirates and Etihad Airways, said Mabasa, adding that it can be cheaper to reach some international destinations via the Middle East than direct with SAA. That would leave the South African carrier to focus on domestic service and compete better with Ethiopian Airlines Group in the rest of the continent.

SAA’s most recent restructuring plan, dated August 21, favours a reduction in frequencies rather than a full withdrawal but also lays out more extreme scenarios where flights to cities such as Sao Paulo and Perth are curtailed. Its ex-Africa operation could then target North America — namely New York and Washington D.C. — and Europe.

Optimise Fleet

If routes are cut, the airline will have to pare back the size of its fleet, which comprises almost 50 Airbus SE jets. Aircraft will also need to be upgraded to reduce fuel spend and boost profit, with the replacement of ageing A340 models with more efficient A350s already underway.

The first of four A350-900 aircraft was delivered early last month, which acting chief executive officer Zuks Ramasia said at the time was a step toward financial stability. SAA spokesman Tlali Tlali says Matuson will now decide how the fleet should be renewed.

“Using A350s on routes to Hong Kong and New York will see an immediate 20% to 25% saving just on fuel costs,” said Linden Birns, managing director of Plane Talking, a Cape Town-based aviation advisory service.

Job cuts

SAA’s surprise attempt last month to cut almost 1,000 jobs, or about a fifth of the workforce, accelerated the path toward bankruptcy protection after two labour groups embarked on a costly week-long strike. That’s likely to make Matuson wary of any immediate attempt to revive the plan, with union negotiations likely to take place instead.

Solidarity, which has about 280 SAA group staff among its members, had filed its own lawsuit to force bankruptcy protection before the government pre-empted the action with its own plan. Larger labour groups, such as the National Union of Metalworkers of South Africa, have said they back business rescue in principle but want to be involved in the process — objecting to not being consulted about the identity of the practitioner.

“The unions won’t be doing themselves any favours by pursuing further strike action,” said Mike Mabasa. “They should instead make progressive recommendations to the protector.”

Scrutinise Finances

A key element of the work of any team of corporate recovery practitioners is to go through a distressed company’s finances, and that may be where some of the real SAA horrors lie. While financial statements for the year through March 2018 show losses holding steady at about R5.3 billion, the carrier hasn’t yet submitted accounts for the most recent year.

Two years ago, Auditor-General Kimi Makwetu completed a review of SAA and found that — apart from mounting losses — the airline failed to properly record financial information and the value of assets such as planes and property.

© 2019 Bloomberg

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

COMMENTS   10

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

Let’s hope the BRP doesn’t keep the business in BR for a prolongued period (as BR is famous for), if there’s no value which they can generate/add … just liquidate the thing and let’s move on with our lives

Goodluck to Les and the rest of the team though! Big mountain to climb

Ah yes, here we go again! All the “I don’t want to work fraternity” at SAA are already starting to eye and make it their primary objective to make the BR process fail. The BRP might as well throw in the towel and liquidate SAA immediately, because whatever he does will be tantamount to carrying coals to Newcastle!

They should rename it to Air Zimbabwe or Air Venezuela because it is taking South Africa all the way to the brink of hyperinflation.

There are enough competitors who do not need bailouts and business rescue. The free-market is ready so save South Africa from the South African Airlines, but the cadres initiated a huge pushback effort. In true communist fashion, the cadres just love bankrupcies.

Its a sort to do list.
1. Announce that its bankrupt and cannot be fixed
2.. Contact the auctioneers.
3.Shut the cesspool down.

short list:
Offer the creditors 2c in the Rand
Call in the auctioneers
Switch off the lights, .. ok don’t worry about that (see what i did there …)

Sounds like the appointment was prearranged with Gordhan – how independent is this firm really?

Agree this guy has one hand tied behind his back, the other is already chopped off at the elbow and the unions are breathing down his back.

Less than 20% of BR attempts are successful, me thinks this one is much too far down the toilet.

The pilots are good, the planes are good so what is there to do?

clean up corruption? That takes time as the finger pointing starts. Immediate effect would be to cut the staff by half……………the unions won’t allow that nor will government, so if he requests money it will be little dribbles like R4 billion a time.

SAA international is insignificant, it makes no sense flying around the world from the one corner. International airlines must be centrally located, Dubai, Europe. SAA has 20% local market easily absorbed by the others. We won’t even feel it when they close.

The patient is brain dead, pull the plug.

When Cyril ‘took over’ everyone was super excited. Fast forward to now, Cyril is nowhere to be found. At the rate the cANCer is burning through our tax money soon we’ll be in business rescue.

Load All 10 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: