Recapitalisation the only option for SA Express as banks refuse to lend it cash
South African Express needs to be recapitalised as its bankers are refusing to provide the struggling airline with further loans.
GM in the CEO’s office, Edwin Besa, told members of Parliament’s public enterprises committee on Wednesday that the banks had realised SA Express could no longer rely on bank loans (underpinned by government guarantees) and needed to be recapitalised.
"They have made it clear that without a clear turnaround plan and confirmed support from government for recapitalisation, they will not give us any more loans," Besa said in a briefing to the committee
He said it was "very urgent" that SA Express be recapitalised for it to be sustainable. This would enable it to repay its bank loans and finalise the going-concern problem, which has been holding up the finalisation of the 2016-17 financial statements.
SA Express acting chief financial officer Mpho Selepe said recapitalisation would allow the airline to recruit skilled staff and have enough spares to keep its aircraft in the air. It would also allow SA Express to reduce the number of chartered aircraft it was forced to rely on.
Besa said it was necessary to strengthen leadership, improve governance and address operational and financial challenges.
"Most of the critical positions are not filled. As employees leave we are unable to fill the positions because of the salaries we are offering. We are not able to retain the staff we have. Most of the staff are leaving.
"In terms of leadership there is a lack of accountability that we need to focus on to make sure that people take responsibility for their actions. To address this we need to fill critical positions at least to make sure that the airline is able to function optimally. We need to carry out succession planning and also establish consequence management."
Besa said that on the governance front, there was a lack of adherence in the company to processes and internal controls. It was necessary to look at policies and procedures so staff understood what they were supposed to do to comply with them.
Regarding operations, Besa noted that the airline had to be returned to service and action had to be taken to ensure that its aircraft were reliable. On-time performance had to be improved and flight cancellations addressed by ensuring that there were sufficient spares, so that the aircraft could be repaired.
Doing all this would improve liquidity, strengthen the balance sheet and improve financial performance.
"We need to achieve organisational renewal," Besa concluded.