SAA says it needs capital injection ‘now’

Around R5bn is needed to pay down debts and for operational costs, chief executive Vuyani Jarana says.
SAA will need to repay bank debts of R9.2 billion by March 2019, says CEO Jarana. Picture: Moneyweb

South African Airways (SAA) needs a new capital injection “now” to stay afloat and is in discussions with banks and the National Treasury for “an open credit line”, its chief executive said on Tuesday. State-owned SAA, which has not generated a profit since 2011, is regularly cited by ratings agencies as a drain on the government purse and has already received state guarantees totalling nearly R20 billion.

“We do need access to capital to sustain the operations and we are having discussions with Treasury, as well as the banks around how we have an open credit line,” Chief executive Vuyani Jarana told parliament.

Asked by an opposition lawmaker when the airline would need to access billions of rands of extra state support, Jarana responded “Now”.

He later told reporters that SAA would need around R5 billion this year to pay down debts and for operational costs. The struggling airline has not had credit facilities since August when bank lenders pulled the plug after a debt repayment scare.

“Over the next six months we will need… in the range of R5 billion to make sure we can support the working capital,” Jarana said, adding that amount included arrear payments.

The National Treasury said that SAA needs an equity partner to pump money into the company to address a liquidity crisis and to help with the implementation of a turnaround plan.

The company’s results for the year to March 31, 2017 – which had been delayed after the company received a R10 billion government bailout last year – showed a deepening loss of R5.6 billion, a more than threefold increase from the previous year’s R1.5 billion loss.

SAA will need to repay bank debts of R9.2 billion by March 2019, Jarana said, adding that this figure could increase.

SAA has not been able to pay the principal amount, we’ve always been able to service the interest payments on this, so part of the strategic options we are looking at… is an optimal capital structure,” he told reporters.

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As we all suspected, the taxpayer will have to pay for SAA for eternity.

SELL SAA ASAP,

WHY MUST WE TOIL TO WORK EVERY DAY, SWEAT AND BLEED TO PAY FOR TAXES,
JUST TO PAY FOR POLITCIANS TRIPS???

I think “sell” is a misnomer. Government will have to pay someone to take it away – if they ever do. The gravy is too lucrative. Thieving scum.

New CEO and we still have to pay for SAA?

I suggest that all Tax Payers get Free SAA flights tickets every year.

Knock knock…..helloooooo? ANYBODY HOME at the PIC…? There’s a customer at your door!

A sane and logical politician will look at the situation and ask himself “which local airline is real national asset and which airline is a disastrous national liability?”

Then he will see that Comair is a national asset and SAA is a national liability. Then he will take the money that would have been spent on a bailout of SAA and give it to Comair to motivate them to take over SAA for free.

This is what a sane and logical leader would do. The mere fact that SAA is still around, proves that ANC leaders are insane, irrational and unreasonable.

Don’t fly SAA. It only encourages them. And then they hang around longer.

There is nothing to sell. SAA has no assets, they lease their planes & have enormous debts. The only way out is to shut it down. Hoping for equity investors is like looking for the pot of gold at the end of the rainbow. It ain’t going to happen. Investors are rational.

To be a tax payer , your company must make a profit ,which to us ordinary citizens , entails blood ,sweat , daily toil and tears . To abuse our efforts by using our tax contributions to fund a permanent loss making business , can only be described as insanity . The ANC rationale for this irrational activity is that SA Airways is a strategic asset , hence a scarce resource . Maybe in 1945 , after the war , planes were scarce , but now planes are as available as motor cars . Illusions of grandeur , jobs for cadres , free flights for government officials , are the actual reasons .

So basically a 5bn guarantee/bail out annually for SAA forever? Not rocket science but clearly these corruption slush funds with bloated staff and poor operational controls are coming to a head…where is gov supposed to find 5bn after they couldn’t even plug the gap on the budget without raising VAT.

What seems to be lost on many people, including SAA management, is that these successive equity injections are merely very short-term stays of execution. They are described as “recapitalisations”, but lending (or donating) money to an entity to pay off historical debt doesn’t set it up on the path for future success, especially if it remains loss-making. Most troubling is that fact that SAA cannot turn a profit on the London route.

End of comments.

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