Embattled state airline South African Airways has secured R3.5 billion from lenders to keep the company afloat until the end of March – but it still needs billions more.
SAA spokesperson Tlali Tlali confirmed on Wednesday that the funds were secured from local lenders, and is part of the R21.7 billion it needs to implement its three year turnaround strategy.
The latest round of funding will ensure that the group remains in operation until its financial year end in March.
According to professor Jannie Russouw, head of Economic & Business Sciences at Wits University, speaking to Classic FM Business, a company cannot “borrow its way into prosperity”, so the sustainability of the R3.5 billion injection depends on whether the airline can start turning a profit and running a successful business.
SAA has failed to make a profit for a number of years, with current forecasts estimating that the airline will only be profitable by 2021 and will incur financial loses of R5.2 billion and R1.9 billion for the 2018/19 and 2019/20 financial years respectively.
CEO, Vuyani Jarana has expressed confidence in the airline’s turnaround strategy, but stressed that the company needs time and assistance from government to make it work.
During the 2018 Medium Term Budget Policy Statement, the airline received an additional R5 billion special appropriation to help it pay off its debt – R3 billion of which went to servicing the group’s debt.
In total, analysts have calculated that the airline has received government financial assistance totalling a staggering R57.8 billion since 1999.
According to Russouw, SAA should be dropped by the South African government – adding that bailouts over the years could have been put to far better use in education or to provide housing.
One of the biggest pushes from stakeholders has been for an equity partner to step in and provide some relief through partial privatisation.
The Department of Public Enterprises said it is considering the possibility of introducing a strategic equity partner for the airline, according to the Parliamentary Communication Services.
However, Jarana said SAA is not ready for this as it would first need to restructure its portfolio to meet the demands of the market. He added, however, that a strategic equity partner would bring about certainty for the airline’s future.
Officials from the department told the Standing and Select Committees on Appropriations last month, that despite previous bail-outs for SAA, including the most recent R5 billion, the airline will still be insolvent.
Source: BusinessTech
