Steps being taken to keep SAA flying

Steps being taken to keep SAA flying
State pension fund may have to save SAA - Image - Die Vryburger

Finance Minister Malusi Gigaba says steps are being taken to address the challenges faced by South African Airways (SAA).

Addressing Members of Parliament (MPs) at the Old Assembly Chamber in Parliament on Friday, the Minister said while the airline is faced with external market challenges, as is the case with other airlines, there were internal matters that SAA is looking at to bring stability in governance and to also ensure the airline’s liquidity is protected.

The Minister was accompanied by SAA’s top leadership, including Chairperson Dudu Myeni and newly appointed CEO Vuyani Jarana.

“There are far deeper challenges that we are facing at the airline that we need to address and some of those are just quick win decisions, we need to deal with revenue management, we need to ensure that our IT systems enable us to exercise far greater control and management of internal governance processes and business and commercial processes.

“We also need to deal with a whole range of decisions which include the route networks, which includes the strategic use of our metal, which include ensuring that we rationalize the incentive schemes of our pilots. It remains a daunting challenge … that the incentive structure of our pilots in particular costs the company enormously when you compare with other airlines of similar size in other countries and we need to address the issues of the productivity of our pilots in comparison with the pilots of other airlines of comparative size,” he said.

This comes as the SAA Board and top executives work around the clock to implement the turn-around strategy that is aimed at bringing stability at the airline.

The Minister said steps that are being taken to address the cash flow and the liquidity challenges that the airline faces “are issues of the greatest interest to the shareholder, which we have instructed the board to deal with as a matter of urgency because we don’t need to do something that is so huge in order to address the liquidity challenges”.

“There are quick wins, there are strategic decisions that the shareholder is also taking, which we will announce at the Medium-Term Budget Policy Statement (MTBPS) to assist the airline to address these challenges and there are matters of the medium and long-term nature that the board has been instructed to take and that have been reported to me to be taken,” he said.

The Minister said to address stability and governance, the appointment of the new CEO, was one of the measures he recently announced as part of the 14-point plan aimed at instilling confidence in the economy.

He said he was hopeful that Jarana’s appointment would bring about stability at the airline that has had five CEOs between 2013 and 2017.

Jarana was the Chief Officer for Vodacom Business at Vodacom Group LTD, a position he has held since 2012. He is also a member of the core leadership team of Vodacom Group responsible for the enterprise segment across the continent.

“[Jarana] brings a wealth of experience which we think will be very vital to the airline. As you know, the CEO on his own is not going to solve the challenges that are facing the airline. It is an important intervention, it is an important step,” he said.

The Minister said Jarana has some work cut out for him in order to turn the airline around and address the challenges which are being faced.

“And so the CEO, as important as that decision is, is only but one step in a string of decisions that we need to make in order to address the challenges facing SAA.”

Jarana said, meanwhile, that together with the Board and exco, he would focus mainly on stabilising the airline and ensuring that it addresses key liquidity issues and address key balance sheet issues as well.

“I think in this we want to make sure that we do not allow for what the market is doing to take the airline down. We need to respond in terms of how we defend. And then we can build from that point,” he said.

He said the airline was looking at five key areas aimed at improving the state of finances at the airline, and this includes route rationalisation, which will result in a saving of R900 million. Other cost optimisation measures that includes fuel management would save the airline an additional R520 million by the end of the 2017/ 18 financial year.

Fleet management will also be an area of focus, and over the next few months, SAA will work towards retiring five wide-body aircraft.

Jarana also said the airline would look at ensuring that the organisational structure is managed better, and that they don’t fill vacancies that are not needed.

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