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South African Airways needs a new capital injection “now” to stay afloat and is in discussions with banks and the National Treasury for “an open credit line”, its chief executive said on Tuesday.
State-owned SAA, which has not generated a profit since 2011, is regularly cited by ratings agencies as a drain on the government purse and has already received state guarantees totalling nearly R20 billion.
“We do need access to capital to sustain the operations and we are having discussions with Treasury, as well as the banks around how we have an open credit line,” chief executive Vuyani Jarana told Parliament.
Asked by an opposition lawmaker when the airline would need to access billions of rands of extra state support, Jarana responded: “Now.”
He later told reporters that SAA would need about R5 billion this year to pay down debts and for operational costs. The struggling airline has not had credit facilities since August when bank lenders pulled the plug after a debt repayment scare.
“Over the next six months we will need ... in the range of R5 billion to make sure we can support the working capital,” Jarana said, adding that amount included arrear payments.
The National Treasury said that SAA needed an equity partner to pump money into the company to address a liquidity crisis and to help with the implementation of a turnaround plan.
The company’s results for the year to March 31 2017 – which had been delayed after the company received a R10 billion government bailout last year – showed a deepening loss of R5.6 billion, a more than threefold increase from the previous year’s R1.5 billion loss.
SAA will need to repay bank debts of R9.2 billion by March 2019, Jarana said, adding that this figure could increase.
“SAA has not been able to pay the principal amount. We’ve always been able to service the interest payments on this, so part of the strategic options we are looking at ... is an optimal capital structure,” he told reporters.
Meanwhile, the Standing Committee on Public Accounts has voiced its concern with the lack of record keeping at the SAA as a result of former employees who left with files containing critical information now needed for forensic investigations. This is contributing to the challenges currently facing the airline.
“Scopa realises that more engagements with SAA are required due to the number of challenges plaguing the airline. Over and above the loans of R8.9 billion and liabilities of R17.8 billion, the airline also has fruitless and wasteful expenditure of R46 million. All this is an indication that a lot of work is required to assist this entity,” the Scopa’s chairperson Themba Godi said today.
“The committee would also like SAA to urgently curb losses, currently running at more than R5 billion. SAA management should focus on areas of high expenditure that are cost drivers.”
Scopa has also asked SAA to look at the institutional arrangement of SAA Technical and Air Chefs, and consider whether they should be entities with their own boards or merely divisions within SAA, because they are some of the biggest contributors to the challenges facing SAA.
– Reuters. Additional reporting by City Press reporters
