South Africa's treasury has earmarked a further R5 billion ($349 million) to help the nation's struggling flag carrier to settle maturing debt over the next six month, as well as R1.2 billion support for a state-owned regional airline.
The cash injections for South African Airways and SA Express were confirmed in a mid-term budget presentation today by finance minister Tito Mboweni, who warned that despite progress in cutting losses, more restructuring work was needed.
Loss-making SAA has long struggled amid high debts, boardroom battles and political wrangling. The airline has now embarked on fresh restructuring under the leadership of Vuyani Jarana, installed as its first permanent chief executive for almost two years in November 2017.
Mboweni flags the progress of the restructuring effort at the Star Alliance carrier. "In the past year, almost all of the regional and domestic routes operated by South African Airways have become profitable. SAA will reduce and ultimately stop operating loss-making international routes. SAA procurement has unlocked annual cost savings of R400 million [$107 million]," he says.
"Despite these efforts, SAA is still loss-making and even more radical measures need to be undertaken. There should be no holy cows!
"To support a sustainable reconfiguration of our airline portfolio, in 2018/19 government will provide additional funding for SAA and South African Express Airways," he says.
The budget statement notes that SAA has a R19.1 billion government guarantee, R14.5 billion of which has been used. Debt of R14.2 billion is maturing in or before March 2019. The government will in 2018/19 allocate R5 billion to help the airline repay this debt and prevent a call on its outstanding debt.
R1.2 billion has been allocated to SA Express.
That airline has likewise been struggling. Public enterprise minister Pravin Gordhan in May indicated that SA Express was likely to require a recapitalisation. Later that month, the airline was grounded following a safety audit by the national aviation regulator. Former chief Siza Mzimela has since been installed to lead the carrier on an acting basis, and SA Express began restoring flights in August.
SAA has required a series of government bailouts to continue operations over recent years as a result of its heavy debt burden.
In announcing the latest cash injections, Mboweni says he is working closely with Gordhan to "limit" the fiscal cost of supporting the two state-owned airlines. "By the end of the year, the boards of these two companies will present plans to strengthen and align their operations," he says.
In April, SAA disclosed a full-year net loss of R5.67 billion ($463 million) for 2016/17, but projected it would break even in the 2019/20 financial year, before becoming profitable.
Source: Cirium Dashboard