South African Airways (SAA) is in discussions with treasury for another cash injection of approximately R5 billion for the 2018/19 financial year.
This emerged from submissions by SAA CEO Vuyani Jarana at a meeting of Parliament’s standing committee on public accounts on Tuesday.
Jarana told the committee that the national carrier’s finances are a mess, and that SAA needed R5 billion “now” as working capital to keep going.
R20 billion needed over the next 3 years
Just last year government granted the airline a R10 billion bailout and according to Deputy Minister of finance, Mondli Gungubele, over and above that and the R9.2 billion currently owed to lenders, SAA will require an additional R20 billion in bailouts over the next three years to break even.
“By March 2019 the R9.2 billion will have matured as a debt, which must be paid to the funders. Over and above that, R12 billion would be required. All that together makes about R20 or R21 billion. With that in place, we are very positive that we are going to be on a path that will help us break even in 2021.”
Despite the bleak outlook Gungubele says the national carrier has a clear turnaround strategy aimed at fixing its finances, corporate governance and model and that the cost of closing down SAA could be much higher than the R20 billion needed to keep the airline afloat.
“Another option has been about throwing this entity away. The implications would be no less than R60 billion as opposed to turning this company around. We accepted that it is worth it to stick it out and we are open to being interrogated,” said Gungubele.
SAA beyond repair
The Democratic Alliance however believes that the current state of affairs has proven that the national airline is beyond repair, with no possibility that it will ever be able to trade its way out of debt.
DA shadow deputy minister of finance, Alf Lees, noted that government’s bailout strategy would equate to a total of R31 billion of taxpayer money being used for SAA bailouts – just to fund losses without any purchases of new aircraft.
“The deputy minister informed parliament that the calculated cost of liquidating SAA would amount to a massive R60 billion. The choice facing the South African taxpayer is to pay another R21 billion and take the risk that SAA will be profitable by 2021, and will remain profitable thereafter, or to cut the losses and pay R60 billion to shut SAA down immediately,” Lees said.