SAA losing R500 on every ticket sold
Guy Leitch, editor of FlySA Magazine, says that South African Airways, the flag carrier and largest airline of South Africa, is currently losing around R3 billion annually – or about R500 for every seat sold.
Speaking to Talk Radio 702 about the state of the indebted airline, he noted that the losses extended across both domestic and international flights. It’s a crude calculation of the total loss made by SAA, divided by the total passengers carried – but puts into some perspective, the financial state of the company.
This past week, National Treasury announced that it was dipping into the country’s emergency funds to bail SAA out of a R2.2 billion loan repayment.
The loan was called in by financier, Standard Chartered, after the group denied a request by SAA to extend its loan facility.
And according to Leitch, this is far from the end of SAA’s financial woes.
The beginning of the end for SAA?
“This is the beginning of perhaps the end of a pack of cards falling. There is another R9 billion in loans due for repayment by the end of June, and if Standard Chartered wouldn’t renew theirs, then probably the other lenders won’t,” Leitch said.
If just one loan is defaulted on, Leitch said, the conditions of all the other outstanding loans changes and they will all have to be called in. This would increase the order from R9 billion to around R19 billion, he said.
“And let me point out that this money is not immediately available, which is why they had to raid the economic fund at this stage – and there’s talk that they will raid the government’s pension fund next,” he said.
The SAA bailout has sent alarm bells ringing across South Africa’s economic stakeholders, with ratings agency, Fitch, warning the country that its mismanagement of SOEs is dragging down the economy.
Finance minister Malusi Gigaba said that, because of the risk of defaulting on the loan, the SAA bailout was urgently needed, and would not impact the fiscus as it was drawn from the country’s National Revenue Fund.
However, the minister has faced criticism for giving SAA a ‘free ride’, by signing off on the bailout without attaching strict conditions – like getting rid of defiant SAA chair, Dudu Myeni, who has overseen multi-billion rand losses at the airline during her tenure.
SAA posted a R1.9 billion loss for its 2015 financial year, following a R1.5 billion loss in the year prior. Early reports point to a loss of as much as R4.5 billion in the 2016 financial year.
Read: SAA bailout is a black mark against SA’s economy, Fitch warns
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