Special SAA oversight committee set up, chaired by Mondli Gungubele
'Those issues continue to the extent that it was decided that we should form an oversight committee. The deputy finance minister is the chairman'
A special oversight committee chaired by Deputy Finance Minister Mondli Gungubele has been established to address the South African Airways’ liquidity challenges and to set in motion the process of finding a strategic equity partner for the troubled airline.
SAA chairman Johannes Magwaza said this in his introductory remarks to Thursday’s briefing by SAA CEO Vuyani Jarana to Parliament’s finance committee on the airline’s fourth-quarter results.
The net loss for the quarter, at R1.8bn, was R1.2bn worse than budget and it predicts a R5.87bn loss for the year.
"We have liquidity and going-concern issues," Magwaza told MPs.
"Those issues continue to the extent that it was decided that we should form an oversight committee. The deputy finance minister is the chairman.
"We have had no less than six meetings at which we are looking at the liquidity, the sustainable financial structure of SAA and the process for looking for a strategic equity partner."
Magwaza said SAA had "serious traction" in terms of the implementation of its long-term turnaround strategy, and "green shoots" were emerging.
Despite all the challenges, the business of the airline was strong, he said.
The issues raised by the auditor-general in the last financial statements were being addressed.
Magwaza stressed that safety at SAA was sacrosanct and would not be compromised.
Jarana said the oversight committee, consisting of Treasury officials and SAA board members, was looking at how to optimally combine shareholder capital, strategic equity partner and debt as part of its capital structure. It would also look at how to remove the obstacles to SAA becoming successful.
It is envisaged that the work of the oversight committee will be finalised by September this year.
Jarana stressed that SAA needed funding for working capital in order to break even in 2021 as planned.
He said the uncertainty over SAA's going-concern status had had a negative impact on its standing in the market.
The "green shoots" mentioned by Magwaza were coming through in the significant improvement in gross margins compared with last year, Jarana said.
Average fares were also increasing, which meant SAA would be able to pay for itself on its domestic routes, which historically was not the case.
There were also big improvements on the regional routes but there had not been enough rationalisation of the international routes for the results to have come through yet.
Talks were under way with trade unions on the rationalisation of the airline, with an emphasis on job preservation through outsourcing to "soften the blow". For example, there were excess pilots.
"Unless we address the cost base we will not be successful," Jarana stressed.
Finance committee chairman Yunus Carrim said permission had been obtained from parliamentary authorities to close the meeting if SAA wanted to discuss market-sensitive issues.