Tue, 04 Aug 2020

South African Airways (SAA) announced on Monday afternoon that has informed its 5 146 employees that it is embarking on a restructuring process which may lead to job losses.

The restructuring excludes SAA subsidiaries SAA Technical, Mango Airlines and Air Chefs.

Acting CEO Zuks Ramasia said in a statement the airline has commenced a consultation process with all employees in line with the Labour Relations Act.

She said SAA has faced numerous challenges over the past few years, including, funding and liquidity challenges, the inability to borrow indefinitely without repaying debt and high interest costs on loans.

"Our continued losses and reliance on government guarantees to borrow money from lenders, have increased the interest costs which impacts the operating cost of the business," said Ramasia.

Other challenges include a volatile and fluctuating fuel price, currency volatility, insufficient revenue and cash generation in relation to operating costs, an ageing fleet which is expensive to maintain and is fuel inefficient. Ramasia said this makes it difficult for SAA to compete in the market place.

Fin24 reported last week that SAA is apparently scrambling to obtain R2bn before November 20, according to a source.

Asked about the alleged rush, SAA spokesperson Tlali Tlali told Fin24 at the time that the R2bn was "always part of our requirements for working capital so this is not new". He said SAA is in the process of "procuring that required amount".

Over the past 13 years, the flag carrier has incurred over R28bn in cumulative losses. In the medium-term budget policy statement, Finance Minister Tito Mboweni announced that the state would pay off SAA's government-guaranteed debt of R9.2bn "over the next three years" to honour the airline's contractual obligations.

Dr Azar Jammine, director and chief economist of Econometrix, said that while he did not have specific knowledge about the R2bn, this is the kind of thing that has been happening at SAA over the past few years. The airline, he said, is given lines of credit which then expire and has to borrow money anew.

"The commercial banks have been getting a bit sticky about lending money to SAA without the necessary (state) guarantees because of the huge losses the airline made," Jammine told Fin24. He explained that the provision of such a guarantee by the government, should a bank require it to give SAA a loan, is different to a "bailout" where government would simply give SAA the money.

Jammine said it could be that a lot of short-term SAA loans might be expiring, leading to an inevitable scramble to deal with it by lending more money.

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