Green shoots already showing at SAA, says Mondli Gungubele
The deputy finance minister said most of the airline’s routes were now profitable — but all opposition parties except the EFF still vehemently opposed the R5bn bailout
Green shoots are beginning to show at the national airline SAA with all but one domestic and one regional route now already profitable, deputy finance minister Mondli Gungubele said in parliament on Wednesday evening.
He was speaking in support of a R5bn bailout for the struggling state-owned airline, a move strongly opposed by most opposition parties. The bailout, which is provided for in the Special Appropriation Bill, was finally adopted by the National Assembly. An allocation of R1,249m has also been made to the other loss-making state-owned airline SA Express.
The new board and management of SAA, he told MPs, had established a firm basis for a sustainable turnaround of the airline and initial positive results were already emerging.
The only domestic route that was not profitable at gross profit margin level was the Port Elizabeth route. “Now that the margins have returned, SAA is increasing frequencies in the domestic market — Joburg to East London and the Johannesburg to Cape Town routes — to claw back market share.
“There is clarity about balancing pursuit of market share with pursuit of profitability. Over the years SAA has been blindly chasing market share at the expense of profitability leading to major losses. This balance has to be found.”
The only regional route that was not profitable was the one to Entebbe, Uganda. The London route had been profitable for four months in a row since flights were consolidated into a single daily flight.
The other international routes had been negatively affected by the oil price and poor performance by SA Technical, SAA’s maintenance arm. This had impacted on aircraft availability and schedule integrity and costs.
If the oil price remained at its current low level it would be possible, Gungubele said, to claw back the losses suffered in the first half of the year in the international market. SAA now had the right flight availability for its international routes.
“Procurement benefits are being realised. As we speak now R400m a year to date has been achieved and there is an aim of targeting R2.8bn in procurement savings over the next three years,” Gungubele said.
However, DA deputy finance spokesperson Alf Lees noted that SAA had, as a result of political interference, poor management and rampant corruption, consumed R31.4bn in “bailouts” that could have been used to stimulate the economy and create jobs. In the six months to the end of September 2018 SAA had already racked up losses of R2.2bn and forecast a loss of R5.3bn for the full 2018/19 financial year.
“Now we are told that SAA will be forced into liquidation if they do not receive another R3.5bn before the end of March 2019,” Lees said.
“Right now, SAA is insolvent and is trading recklessly. Under the present circumstances it will not be possible for the board and management to stand any chance of nursing SAA back to profitability. They are spending all their time jumping from one funding crisis to the next with the false hope that poor South Africans will be happy to provide, like some rich uncle, the R21.7bn SAA say they have to have (over the next three years) in order to possibly, with no guarantees given, return SAA to profitability.”
IFP MP Mkhuleko Hlengwa said the IFP could not support another bailout, especially as SAA had not yet tabled its 2017/18 financial results. “This bailout is on the back of the poor,” he said. The only solution is to sell SAA.
UDM MP Nqabayomzi Kwankwa said the state could not continue pumping billions into state-owned enterprises that wasted and squandered it with impunity. The UDM could not support the R5bn appropriation for SAA as it did not believe it would spend the money properly.
Freedom Front Plus MP Wouter Wessels said bailing out state-owned enterprises which were not a going concern was “insanity”. He supported privatisation.
EFF MP Thembinkosi Rawula supported the R5bn bailout to stabilise SAA which he insisted should remain in state hands. He accused Gordhan of deliberately collapsing state-owned enterprises — which Rawula considered essential for economic development — so that they could be privatised and “sold off to his friends and masters the Ruperts, Oppenheimers and others.
“That is why he (Gordhan) has begun a process of purging boards of state-owned enterprises of black executives without following due process and replacing them with whites from the private sector who facilitate the collapse of the very businesses they have been assigned to manage. SAA must be saved,” Rawula said.