SAA FINANCIAL WOES
SAA finances and running of the entity has been under the spotlight in recent years. With continuous bail-outs by the government. The decline has been contributed to a variety of factors such as changing airline network viability, high fuel prices (e.g. Brent crude oil), competition from low cost airliners. Former Chair Miss Dudu Myeni also alluded to the once termed “evergreen contracts” when she and her board had to account in parliament in 2016.She noted that there were companies trading with SAA on long term contracts, expensive as they are, terminating them would accrue penalties. High pilot salaries raised a lot of eyebrows from Fedusa, a Union representing the pilots. When the matter was scheduled to be discussed further in parliament, the pilots threatened to down tools and go on strike, claiming that government failures to run SOE’s should not be blamed on pilots or SAA employees. In the media there were reports of pilots still entitled to benefits even after retirement, such as medical aid and free travel allowances.
In the auditor general report tabled at the end of the 2015/16 financial year. It was noted that SAA had failed to continuously monitor and record the reasons for their financial losses. This presented a mammoth task to the audit team in pinpointing the exact cause of the financial crisis. The SAA board was subsequently asked to account in parliament on accusation of fraud and corruption
CUTTING COSTS.SAA has introduced in the past measures to cut costs, in trying to stabilize the entity. The measures introduced included the selling of routes that were no longer profit – abler. The routes sold include:
The strategy focused on introducing more airlines on profitable routes in the African continent, such as Libreville – Gabon, Cotonou – Benin, Brazzaville – Congo, Pointe Noire – Congo. The strategy has not yielded any positive outcomes but only alleviated the debt deficit of the airliner. African countries such as Ethiopia, Botswana and Kenya have introduced their own world class airliners, providing stiff competition.
RECOMMENDED SHORT AND LONG TERM SOLUTION
An immediate intervention to resolve the airliners financial woes would lessen the financial strain the entity has on the reserve bank reserves. The proposed long and short-term interventions are listed below.
SHORT TERM INTERVENTIONS.The catering entity of SAA, Airchefs, has to be dissolved and replaced by external service providers. Black-owned SMME’s and pay them on time.
Cease and alter all pilots’ contractual benefits that have incentives or involve financial subsidy to retired pilots, and all SAA ex employees.
The government to immediately require all state officials to use low cost airliner only, Mango, for domestic flights.
Cease and terminate all evergreen contracts, introduce short term tenders that also benefit black companies. It is understood that Bidvest has 10 evergreen contracts with SAA that have been running for the past 23 years.
The introductory of black companies and termination of evergreen contracts would results in stiff competition, and the lowest bidder, offering the same quality service would be contracted to provide the required service/goods.
LONG TERM INTERVENTIONS
Train and employ more black pilots, introducing more domestic flights.
Privatise the entity, and list at the Johannersburg Stock Exchange (JSE)
Make public offerings, where a stake will be owned by the black majority of South African’s,
Shares sold would help generate the much needed cash injection.
Attain foreign skills in areas where lacking, e.g. information technology.
Encourage the link of infrastructure, airports to have a direct link with public transport in all major cities, pulling more domestic travelers.