South African Airways’ five-year plan set to stabilise business

JOHANNESBURG. 19 June 2017. South African Airways (SAA) has made significant headway in putting together a comprehensive and robust 5-year business plan aimed at addressing the current and long-term challenges and to bring more efficiencies and financial stability.

The leadership of the airline is alive to liquidity and solvency challenges that face the business and has taken steps to ensure that the airline remains in business.

SAA has a weak balance sheet, relies heavily on government guarantees to remain operational and has not been profitable in the last few years. The situation is not only undesirable but unsustainable and this led to the development of the turnaround plan that has been put in place.

The Plan is anchored on five main pillars that identified areas on which the business must focus as necessary interventions to set a foundation to lead to commercial sustainability. The plan has a liquidity pillar which makes certain recommendations for implementation.

“SAA has been in contact with its lenders to renegotiate the management of its loans, a normal occurrence when loans become due and payable. The airline has government guarantees totalling R19.1 billion. By 30 June, R9 billion will be due and payable and only one lender has expressed a desire to have its loan paid back.

“We remain optimistic that the company will meet its loan obligations as these become due through negotiations with lenders and other initiatives,” says Musa Zwane, SAA Acting CEO.

Engagements with lenders remain sensitive and confidential and it would be unwise to share salient details with third parties.

“The renegotiation of the terms of the loans are ongoing and SAA is optimistic that the airline will continue to operate, honour its obligations to its customers, suppliers and partners,” concludes Zwane.

The work on the Plan started in earnest in January 2017 and is overseen by the Board of Directors working together with executive management. One of the international airline turnaround consultancies, Seabury Consulting, has been brought on board to assist the local teams in finalising and validating specific initiatives contained in the plan.

The details of these initiatives will be announced once the plan has been approved by the Shareholder.