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SAA loss exceeds target by almost 80%

Income down 10% as new captain comes on board.
Vuyani Jarana, currently chief officer for Vodacom Business, will take over as CEO of embattled state entity SAA. Picture: Vodacom

Struggling South African Airways (SAA) has recorded a R1.46 billion loss in the first quarter of the current financial year, exceeding its target by 79%. It is about R70 million worse than the previous financial year’s loss.

This comes as debt of R6.7 billion matures at the end of September. The airline currently has R19.1 billion of government guarantees, R2.7 billion of which is not being utilised.

Documentation provided to parliament shows that SAA’s income has dropped by 8% in the first quarter compared to the same period in the previous year and is 10% below target.

National Treasury on Thursday afternoon announced the appointment of Vuyani Jarana as new CEO of the airline. Jarana has been at the head of Vodacom Business since 2012.

Finance minister Malusi Gigaba praised Jarana for the way he “transformed and positioned Vodacom Business as a growth engine of Vodacom, growing its contribution to group service revenues from under 10% to 25% over three years and turned around and transformed Vodacom subsidiary Stortech”. He said he believed Jarana would be key in turning around SAA.

It is however not clear when he will take the rudder. Gigaba merely said: “He will commence his duties after his current employer has officially released him.”

Ahead of SAA’s appearance before parliament on Friday, DA shadow deputy finance minister Alf Lees said it was not clear how the SAA losses would be stopped and how the loans that mature at the end of September would be repaid.

Treasury had to step in a month ago with a R2.2 billion bailout when Standard Chartered Bank refused to extend a loan to SAA when it matured.

Lees said the new board that was appointed ten months ago has not stemmed losses. Instead it increased, he said.

The documentation provided to parliament shows that SAA’s finance cost has increased by 37% in the first quarter compared to the same period in the previous financial year. SAA explains this as “a result of greater reliance on debt finance to fund the group’s operating activities”.

The cash flow analysis with projections until December shows a cash deficit after facilities from R568 million in July, peaking at R936 million this month. It is expected to drop to R134 million in October and increase again to R679 million in December.

Lees said the cash flow analysis reveals that SAA has run out of cash and will not recover unless it receives a cash bailout. “In any normal business the creditors would undoubtedly be filing for liquidation.”

SAA has underspent on aircraft maintenance. Its expenditure in the first quarter amounted to R845 million, compared to a target of R1 billion and actual expenditure in the corresponding period a year ago of R1.1 billion.  

The airline states that it needs a capital injection of R13 billion over the next three years. It plans to generate R13.6 billion additional income in the next five years through various initiatives, including network and schedule changes and hopes to save costs to the tune of R10 billion over the same period.

Read: Gigaba considering R13bn bailout for SAA

Parliament has also been provided with one volume of a 2 000-page forensic report prepared by consultants EY after an investigation into SAA’s procurement practices.

The report is marked as draft and dated December 2015. It flags almost a third of the 38 contracts investigated as posing a risk of financial loss or legal liability unless urgent intervention follows. It is not clear whether such interventions occurred.

The report identifies worrying trends, including a failure to test the market for the best price, paying more than the contracted price due to a lack of contract monitoring, delays in tender processes which led to costly month-to-month procurement and a failure to keep documents.

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This on-going tragedy is a mirror image of what’s happening in the country. No leadership – govt wants their airline – no idea if where the money is coming from. Believe me YOUR pension funds will be used to fund this disaster.

Transformation in action

Civil Society needs to motivate financial companies to stop enabling the criminality at SOE’s. SOE’s and Luthuli House will implode the moment banks and pension funds stop lending to them. It is in fact these financial institutions that are keeping the Zupta clan in power. Financial institutions are complicit in the corruption that is now public knowledge, because they are making profit from trading with criminals.

These financial institutions are not doing citizens any favours by extending the life-cycle of these SOE parasites.

We salute Magda Wierzycka from Sygnia for making a valiant stand against corruption.

“SAB has underspent on maintenance” Here comes the real tragedy!

“SAA has underspent on maintenance” Here comes the real tragedy!

Drives me to drink!

As a tax payer, I have underspent on drink. That’s the real tragedy.

This new guy has no chance unless Dudu has her wings clipped is grounded and locked in a hanger, (a very small one) and the keys thrown away, but lets see what the Zuptas have to say……..

I would love to see Dudu in a uniform. Correctional services uniform that is.

SAA has underspent on maintenance. DON’T FLY SAA!!

I know right….but the pilots are still very good.

yes, the problem is not SAA but the management and the politics behind it all.

Magda Wierzycka, the chief executive officer of Sygnia Asset management, has announced that she has fired her auditor, KPMG
Thank you for taking a brave stand Magda and Sygnia.
Auditors have been putting the money before their responsibility for decades, remember Enron, Worldcom, Parmalat? Those are just the big corporations whose names we recognise!

“SAA has underspent on aircraft maintenance” my last 3 SAA flights have all had “technical issues”. This is going to end in tears for some passengers and families

The general public could make a stand and not fly SAA and since they dish out free flights to MP’s like confetti it should bring down SAA quite rapidly

Privatize the thing.

The government must be put in its place. Am I the only one thinking SAA is used to funnel funds out of the country?

Is it even saleable?

Probably have to pay a “buyer” to take it away.

Charge top “management” with treason

the new board that was appointed ten months ago has not stemmed losses. Instead it increased, ….

SAA does not have a board. It has a collection of trough feeding aa/bbb-ees

I can’t understand the ongoing fuss about SAA’s financial problems…

I mean, the most important measures of success of such a SOE (like SAA, Eskom) is to lead others as a shining example of well implemented (and achieved) BBBEE and AA policies. In that respect I think SAA can give themselves a well-earned pat on the shoulder, as an organization they can regard themselves as truly “transformed” and proudly so. This is a vitally important part in corporate compliance.

May the SAA serve as good example & encouragement for other SOE’s to remain focused on their transformation-policies to have all South Africans equally share in the financial success of such a well-lead enterprise. Their achievements to date worth celebrating.

(Economics does not matter. Minor cash flow problems you say? Solution found: the Gupta empire can inject needed capital there / bail it out for all of SA. They are indirectly in control of the state after all, right?)

“loss exceeds target by 80%” … funny that their target was to lose R810m

What!? These phuckers now have a loss target they aim to achieve?
And they exceeded it by 79%, so probably bonuses everywhere, come Christmas.
😀

SAA has underspent on aircraft maintenance.

Chilling!

Yup, if there’s a technical problem at 36,000ft, the aircraft simply needs to pull over to the side of the road….err..flight-path.

(…I wonder where an airliner’s bonnet located. Engine cowling perhaps..)

On more serious note: it will take ONE tragic event (the first and last) that will cause a total loss in trust in the airline safety-wise, and that will be ‘tickets’.

No need for any consumer boycott…just ONE major event is all it takes. (God forbid if my family, or anybody dear is on THAT tragic flight)

A new captain indeed, but can he sail a ship?
Pulling execs out of other industries is not always the solution as they may understand numbers, but not the industry itself.
Vodacom would have grown its revenues without him anyway as cellular business growth is a trend in Africa. So no “turnaround” accolades deserved on a already increasing business. So a new CEO, a 13 Bn bailout and all is hunky dory until the 13 bill runs out. SAA needs radical change with a clean sweep of the board and replacement with highly competent board with proven track records in the industry, otherwise this justremains another “parasital” that feeds off taxpayers

he was in VC business, not VC, which was loss making. I think its interesting to leave an executive position earning tens of millions at VC, and where you have a very good future, to go to one of SA’s worst problem children SAA where you might not be able to get a thing done.

he wanted a new challenge

The answer is simple, privatize this nonsense. Obviously the strategic use of the airline does not benefit tax payers. We need to cut loose all state owned enterprises, they are underperforming and thus putting more pressure on government finances. Households will pay into death in tax, for starters they are few and demands are growing rapidly. This is not sustainable.

That should be good enough for a massive bonus by the standards of SOEs these days.

The picture you have above is not very complimentary. This CEO has the same half closed eyes as his comrade from The SABC did. I guess they have the same Sangoma.

Solution 1- NEVER EVER fly SAA or Mango or anything SAA-you pay triple for a ticket. first taxes,then corruption and then ticket price.

Apparently he put up his hand thinking they were looking for somebody with airtime(and not airline) experience

End of comments.

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