R25 billion needed to rescue SAA

Aviation analysts expect that the government will have to spend even more than the R23 billion allocated to the funding of SAA to get the national carrier back on track.

National Treasury recently announced it had set aside R16.4 billion over the next three years to repay SAA’s guaranteed debt and to cover debt-service costs. A further R6.5 billion was earmarked to absorb the airline’s current losses.

According to a report from the Business Times – an additional R2 billion will be needed to deal with the downsizing of SAA’s operations.

Business rescue practitioners Les Matuson and Siviwe Dongwana announced in early February that several of SAA’s routes would be cut – including flights to domestic locations.

The additional costs

Aviation economist Joachim Vermooten said that this process would include buying out the airline’s contracts to serve the cancelled destinations.

In addition, SAA would have to settle the employment contracts of staff who will be retrenched and pay penalties for cancelling aircraft and equipment that were used for these flights.

“You need to renegotiate yourself into a position that you exit certain assets or agreements or procurement of services. That requires further money,” Vermooten said.

He estimated that this would amount to up to R2.5 billion.

Few want to fly SAA

Recent reports have indicated that SAA is also struggling to put passengers on its flights, after a bout of flight cancellations left travellers with a measure of distrust in the airline’s service.

MyBroadband spoke to several travel agencies who said that customers were reluctant to use the airline.

“There has been a decline in bookings because clients need to know that they will be flying on a specific date and time which is now not guaranteed with SAA bookings,” one agency said at the time.

SAA has not posted a profit in a decade and has incurred net losses of over R32 billion since the 2008/2009 financial year.

Now read: South Africa’s most successful companies vs Eskom and SAA – The glaring difference

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R25 billion needed to rescue SAA