South African Airways (SAA) is expected to make further losses this financial year as its business model has not yet changed and it still faces cripplingly high operating costs, according to acting CEO Nico Bezuidenhout.
This is despite the fact that the airline had made R1-billion in savings. The anticipated loss will mean that the national carrier’s executives will not get bonuses again.
SAA suffered an operating loss of R1.3-billion in the year to end-March 2012 compared to the previous year’s R1bn profit.
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However, SAA’s low-cost sister airline, Mango - of which Mr Bezuidenhout is also CEO - was expected to make a bottom-line profit as it had made a strong turnaround this year.
Mr Bezuidenhout insisted at a briefing to Parliament’s public enterprises portfolio committee by SAA board members and executives on Tuesday that Mango’s performance had nothing to do with the exit of some low-cost airlines, such as 1time, from the market.
He said in an interview after the briefing that there was no doubt that SAA would need more capital, either in the form of an injection from the state or in loans.
The need for a recapitalisation was clear as SAA had destroyed R12-billionn in capital over the past 10 years - R9-billion from hedging losses and R3-billion from operational losses.
Mr Bezuidenhout said a precondition for SAA being able to make a profit was the acquisition of a fuel-efficient fleet. This would be addressed in the 20-year turnaround strategy being drawn up by a special executive task team.
The amount required for capital requirements would depend on the route and flight strategies contained in the turnaround plan and the type and number of airliners required to support them.
Mr Bezuidenhout acknowledged that SAA was top-heavy in terms of staff and that a right-sizing exercise was needed.
There was also room to improve internal risk controls and governance - the weakness in both was of concern to MPs on Tuesday - and to address the leadership instability at SAA and its failure to achieve key performance indicators.
MPs were assured by SAA’s latest batch of acting executives and board leaders that processes were under way to select a permanent CEO who would be recommended to Public Enterprises Minister Malusi Gigaba before the end of next month.
SAA acting chairwoman Dudu Myeni appealed to MPs to have faith in SAA and its board and executives, whom she said were working very hard to deal with the airline’s challenges.
She said that despite "all the noise" in the media about the airline and its capacity to be successful, she could give the assurance that "the skies have never looked clearer" for its future.
Ms Myeni said the latest, long-term turnaround strategy which SAA was formulating would be different from the nine previous ones, which were never implemented and were "gathering dust on the shelves".
She said that the new strategy would be developed, owned and implemented by the troubled national airline’s own executives.
Mr Bezuidenhout also reported that baggage pilferage had been reduced by two-thirds in the year to last month when a rate of 0.29 per thousand bags was recorded.