Inati Ntshanga. Picture: BUSINESS DAY
Inati Ntshanga. Picture: BUSINESS DAY

The unexplained and abrupt departure of Inati Ntshanga as CEO of troubled airline South African Express (SAX) represents a continuation of the costly management upheavals at state-owned carriers.

These companies — South African Airways (SAA), Mango and SAX — have lost a combined R35bn in operational losses and state bail-outs over the past 10 years.

The government wants to consolidate the three airlines to stem operational losses. Their proposed merger would be accompanied by the introduction of a minority equity partner for the combined entity.

Ntshanga, who was CEO since September 2010, left at the end of March "by agreement with the board", said Public Enterprises Minister Lynne Brown, who is the political principal responsible for the regional feeder airline.

The ejection of Ntshanga came after the Department of Public Enterprises missed its self-imposed deadline of end-March to decide on the proposed merger of the state-owned airlines.

For this purpose, the state engaged the services of corporate action advisory firm Bain & Company. The department said the process of developing an optimal corporate structure for the realignment of the companies was in the final stages.

Brown has seconded Victor Xaba as acting CEO of SAX.

Xaba is the deputy CEO of Denel Aerostructures, another state company grappling with its share of corporate governance scandals.

The appointment of an outsider compounds the management turmoil at the airline at a critical point.

SAA and its subsidiary, Mango, have also been without CEOs. A succession of acting CEOs has not been able to stem the financial haemorrhage.

The proposed merger is expected to chart the way forward for the entities and may result in Mango being set free to compete directly with listed operator Comair in the domestic market.

Under Ntshanga’s leadership, SAX came under considerable pressure after its entire fleet was grounded by the Civil Aviation Authority in May 2016 following the regional carrier’s alleged failure to meet safety standards.

The suspension was lifted after a tense weekend of negotiations with the authority.

SAX has recently been reliant on chartered planes to fly its scheduled flights after its fleet of four aircraft was grounded again in 2017.

Brown told Parliament last week that, as of January, all but one of the grounded aircraft had been out of action for more than a year. Between January 2016 and January 2107, SAX used chartered planes for 5,772 flights.

Under such circumstances, the company has been haemorrhaging money. It has not made a profit since 2009.

In March, Brown was forced to intervene when SAX could not honour its obligation to repay R150m to Nedbank and Rand Merchant Bank, adding to the billions of losses.

Both SAX and SAA have been kept artificially airborne by billions of rand in taxpayer bail-outs. State guarantees for SAA alone amounted to R19.1bn in the February 2017 budget, while SAX is operating on a R1.1bn state guarantee, according to the February 2017 Budget Review. More guarantees will be needed to keep the companies airborne.

The companies have lost a combined R14bn in operational losses since 2007, according to published company results.

Under the guidance of the finance minister, SAA has also missed its self-imposed deadline to appoint a CEO.

In September, when the current board came in, it said it would make the appointment within six months.

The recent changes at the finance ministry, where Pravin Gordhan was replaced by Malusi Gigaba as the finance minister, are set to further delay the proposed transaction.

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