Cutting flights and a R10 billion bailout – the desperate plan to save SAA
Following confirmation from National Treasury that selling government’s stake in Telkom to raise R10 billion to bail out SAA is on the cards, internal memos and documents have leaked showing deeper troubles at the airline.
On Thursday, a Treasury spokesperson confirmed to media that selling government’s stake in Telkom – worth over R14 billion – was an option being considered to raise funds to pay off SAA’s debts.
While the option was being discussed, nothing has been finalised, the spokesperson said.
The response from Treasury was forced following comments from the DA’s Alf Lees, who told Parliament this week that Treasury was looking to do the deal.
Government holds a stake of about 39% in Telkom, while government pension fund the Public Investment Corporation holds another 11.4%.
Finance minister Malusi Gigaba previously stated that he would disclose a preferable financing option for SAA at the medium-term budget statement in October, and suggested that non-core state assets could be sold off, to avoid putting additional strain on the budget.
No consultation
According to the Huffington Post SA, internal documents from National Treasury show that Gigaba is trying to pursue the fund-raising for SAA without any consultation – saying that it is an emergency situation.
The leaked documents reportedly show that Gigaba’s plan to give SAA a R7.8 billion bailout (R10 billion, including last month’s R2.2 billion bailout) was not finalised in consultation with the economic, employment and infrastructure directors-general.
The urgency was due to the fact that SAA needs to pay a government-guaranteed debt payment of R6.79 billion by the end of September – failing which, a further R7.8 billion in government guaranteed debt will need to be paid because of cross-default clauses.
The government’s debt exposure to SAA is almost R20 billion.
Cutting flights
In a separate document leak, MoneyWeb reports that internal memos at SAA have outlined a new strategy to cut costs at the airline, including an “aggressive” 20% cut to the number of flights it serves each month.
According to the report, SAA management wants to start cutting 700 flights a month from October 2017 in a bid to curb monthly losses of as much as R340 million a month.
The flights which are on the chopping block are reportedly more domestic – with popular lines between Johannesburg and Durban, Cape Town and East London set to be offed.
Other flight paths in the firing line are to destinations like the Republic of Congo) and Gabon, MoneyWeb reported.
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