SAA Presents Turnaround Strategy

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LazyLion

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Public Enterprises Minister Malusi Gigaba on Tuesday unveiled a 12-year turnaround strategy for troubled South African Airways, focused on consolidating its routes and updating its fleet.

The long-awaited strategy was aimed at bringing the national carrier back to a point where it could leverage off its balance sheet, Gigaba told Parliament's portfolio committee on public enterprises.

"The focus on domestic and regional African routes will have a direct financial impact on SAA," he said.

"It will be able to leverage off its balance sheet without the stringent conditions imposed by lenders due to a weak financial position."

The plan would be implemented in a "speedy and unyielding manner", the minister added, stressing that "failure is not an option".

Increased efficiency, fleet renewal, and cost savings were pillars of the plan, as well as an envisaged brief to all government departments to exclusively use SAA for work travel.

He said the latter would be modelled on the United States' Fly America Act but added that it would be "fruitless if [SAA] had a bad public service record".

New CEO Monwabisi Kalawe hailed the blueprint as the most comprehensive in the airline's history.

SAA reported a loss of R1.25 billion last year.

Kalawe acknowledged that turning it around would be a big challenge given the "headwinds out there" of strong competition, high fuel costs, and a weak currency.


Source : Sapa /ef/tk/jk/jje
Date : 10 Sep 2013 11:58
 
How do you leverage off your balance sheet through capex expenditure? :wtf:
 
Another solution... privatize SAA?

Although that'll cause the unions to throw a big ruckus about it... stuff the unions, and get rid of the leech that's SAA...
 
Garyvdh said:
...an envisaged brief to all government departments to exclusively use SAA for work travel.
Click to expand...

Hang on a second, so a tax-payer bailed out airline is going to force tax-payers to fund the tickets of their passengers. WTF?!
 
DJ... said:
How do you leverage off your balance sheet through capex expenditure? :wtf:
Click to expand...

Not sure - are they saying that they are buying assets? Cash is an asset. But they don't have cash. Government give them cash which goes on the income statement. Then an asset pops up on the BS. And maybe they've fudge the debt.
 
Albereth said:
Not sure - are they saying that they are buying assets? Cash is an asset. But they don't have cash. Government give them cash which goes on the income statement. Then an asset pops up on the BS. And maybe they've fudge the debt.
Click to expand...

I suspect it is just piss-poor communication on their part. i.e. not understanding the phrases they're using. Or they're just being stupid once again. One wouldn't leverage the balance sheet of a company that has massive existing debt. It's just...moronic. Or he's referring to actually utilising the existing assets on the balance sheet, in which case that has nothing to do with updating their fleet.

Their strategy is contradictory based on that article.

And since when has updating their fleet been the bane of their existence? It hasn't...
 
They have the most economical fleet of any South African domestic airline, and the best salaries by far. Internationally, even their old A340s aren't exactly bad. They need to cut down their routes and stop flying empty aeroplanes. Easy.
 
DJ... said:
How do you leverage off your balance sheet through capex expenditure? :wtf:
Click to expand...

Maybe they refer to some accounting classification method where large capex expenses are kept off the balance sheet. They would not appear as debt in the balance sheet making SAA look more creditworthy. I saw this last week during our mining finance course. They were teaching us non-finance people about mining accounting vs. mining finance.
 
just an excuse to keep bailing out SAA for another 12 years with public money while they 'compete' with the real players in the industry, unfairly.
 
dlk001 said:
Maybe they refer to some accounting classification method where large capex expenses are kept off the balance sheet. They would not appear as debt in the balance sheet making SAA look more creditworthy. I saw this last week during our mining finance course. They were teaching us non-finance people about mining accounting vs. mining finance.
Click to expand...

That's just bog standard off balance sheet finance. Which would be the most ridiculous manner in which to infer this. In which case one cannot simply ignore existing encumbered debt. Making this less of a strategy and more of a honky tonk linguistic exercise...
 
"It will be able to leverage off its balance sheet without the stringent conditions imposed by lenders due to a weak financial position."
Click to expand...

Balance sheet=financial position.

No mention of funding details (leverage) over twelve years.

What a poor, nay, typical punch-drunk-on-other-people's-money African response
 
DJ... said:
That's just bog standard off balance sheet finance. Which would be the most ridiculous manner in which to infer this. In which case one cannot simply ignore existing encumbered debt. Making this less of a strategy and more of a honky tonk linguistic exercise...
Click to expand...

I listened to the sound bite again and it seems that in 12 years SAA should be able to use its balance sheet to secure its own funding. Which sounds reasonable but...

If your asset is going to be your fleet, realising it to meet a debt means that there is no airline and the government seems insistent on having a national carrier.
 
my reading of
"It will be able to leverage off its balance sheet without the stringent conditions imposed by lenders due to a weak financial position."
Click to expand...
is that SAA is claiming to have found a business rescue strategy outside of the traditional set of:
taking debt on the conditions your creditors are advancing
liquidating assets
accepting a government bail out
receiving a cash injection from a shareholder

and that for some time SAA has been looking at raising funds using its "balance sheet" but this has constantly been met with a prospective creditor imposing strings that SAA are unhappy with (things like good corporate governance and the like) and government refuses to allow liquidating of assets and as there are no shareholders the standard option has been bail out but the public are tired of this. So what is needed is to find a strategy that will see finance available in a way that is acceptable to government but doesn't need to meet the standard business case for creditors.

China is rather good at advancing finance to "developing countries" (also known as prospective colonies) without evil imperial western strings attached. I imagine several billion rands worth of finance will be available on an unsecured low interest basis to SAA in discussions over routes - Air China could do with a foot in Africa (something else worth noting SAA and Air China are both members of the Star Alliance - codesharing) and currently as far as I can tell SAA has direct flights to Beijing (3 a week) as of January this year but the inverse isn't happening (yet). So take some finance from China today as part of a 12 year strategy and there may be no further need for the traditional options but essentially it is a business rescue and SAA is probably pretty close to a subsidiary of China Air except in name. Of course a couple of factors are needed to make it a success (lets call them factors rather than conditions - it is only western/white business people that put on conditions ... ;)) which includes enhancing SAA's monopoly (all public service flights), carving up routes to a strategic focus (making SAA the regional mile for Air China ...) preferential landing rights etc ...
 
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