SAA said to have hired turnaround expert with a proven track record
Incoming CEO Vuyani Jarana has had talks with British industry veteran Peter Davies, who returned Air Malta to profit and started Caribbean Airlines
South African Airways has agreed to hire a restructuring expert to help turn around the state-owned airline and help meet conditions laid down by lenders to roll over debt, according to two people familiar with the matter.
Incoming CEO Vuyani Jarana met British industry veteran Peter Davies last month and he agreed to help try to return SAA to profit, said the people, who asked not to be identified as the plans are private.
Davies is a former CEO of European airlines including Air Malta and Brussels Airlines and currently runs London-based consultancy Airline Management Group.
"We are finalising steps that will lead to the appointment of a chief restructuring officer," SAA spokesman Thali Thali said in e-mailed comments. "No announcement on the identity of the candidate can be made before we attend and resolve the outstanding issues."
Davies did not immediately respond to a phone call and e-mail seeking comment.
The appointment of a strong management team is one of several conditions lenders have laid down to extend talks on loan repayments beyond Finance Minister Malusi Gigaba’s medium-term budget update in October, the people said.
One of those was a payment of R700m to Citigroup as part of R1.8bn of debt due to the US bank by the end of September, which was released by the National Treasury along with funds for working capital on Friday last week.
Treasury confirmed the payment of R700m to CitiGroup and directed further questions to SAA.
A group of South African lenders led by Nedbank — and including FirstRand, Standard Bank, Barclays Africa and Investec — are prepared to negotiate a refinancing of debt to end-March 2019, the people said.
In his medium-term budget update, Gigaba was expected to announce proposals intended to enable SAA to break even by about that date, including details of a recapitalisation plan, they said.
Nedbank, which is leading the talks, does not provide details of its banking relationships with its clients, a spokesperson said in an e-mailed response to questions.
SAA is one of several state-owned companies in need of urgent funding and government has said it needs a fresh management approach to stay in operation.
The carrier has not made a profit since 2011 and has been surviving off debt backed by state guarantees.
Jarana will become the company’s first permanent CEO since 2015 when he joins from Vodacom on November 1.
Treasury has considered trying to sell part or all of its R12bn stake in Telkom to help finance a bail-out.
SAA said last week it would reduce flights to Port Elizabeth and East London as part of its turnaround plan.
The carrier will also scale back routes to Luanda in Angola and Kinshasa in the Democratic Republic of Congo.
SAA is working towards repatriating as much as $1bn from Angola, Zimbabwe and Nigeria to help strengthen the balance sheet, according to two of the people.
Money is trapped in those countries after exports collapsed, leading to a shortage of hard currency.
Jarana brings private sector experience from his time at Vodacom and Davies has been identified due to his aviation expertise, one of the people said.
Davies took over Air Malta when it was making an annual loss of €70m and made the airline profitable, according to his LinkedIn page.
He also started Caribbean Airlines in Trinidad and Tobago, and made that carrier profitable as well.