We have new ministers at the Treasury and at public enterprises who are not appointees of the Zuma administration. The coddled Dudu Myeni has finally been removed from South African Airways (SAA), leaving a destroyed enterprise.
To eliminate the continuing damage inflicted on the country by SAA, with its patronage network that has milked over R50bn in bail-outs, requires a political will that up to now has been totally absent. SAA represents a serious fiscal risk and it must be removed as a state entity, sold off or closed. The new chairman and board, with a CEO from Vodaphone and some outrageously expensive consultants are certainly not going to be able to resurrect a viable airline from the SAA ashes. Did anyone take note of their recent report to Parliament? MPs heard that SAA’s revenue was R1bn below budget for the nine months to end-December and that it posted a R3.7bn loss for the period, which was 71% higher than the R2.2bn loss that was budgeted.
With the lower revenue and higher operating costs, they are forecasting a loss of about R4.8bn in 2017-18 and about the same in the 2018-19 financial year. But the chairman acknowledged that at the heart of the problem there is a lack of capacity at the executive leadership level, and of critical skills ranging from financial to commercial.
The board also admitted that it is difficult to attract valid experienced people to work at SAA given its reputation. What a surprise! Strange that these corporate leaders did not realise all this before asserting that they would be able to implement a new long-term turnaround strategy.
Your columnist, Bronwyn Nortje, wrote an excellent article showing why SAA doesn’t make money and why it is unlikely to ever make money. It presented a clear and concise review of the airline market and its realities. It analysed the general difficulties of the struggling airline industry, with costs rising faster than ticket prices. It showed the changed competitive environment, where SAA cannot compete against the large Middle Eastern and European carriers.
SAA, with its sole objective of how to lose less, is certainly not in the league of those airlines and is unable to keep pace with the stringent economic conditions that must be met annually. Lacking capital and size, it continues with the inefficient structure of a fleet that is no longer suited to its routes and passenger load factors.
The message is loud and clear, but is the ANC capable of hearing it?