SAA stuns South Africa

For the first time in 12 years, state-owned airline South African Airways (SAA) has posted an annual profit, an early sign that its days of being a complete leech on the taxpayers’ purse could be over.

The interim SAA board confirmed the airline’s surprising achievement for the year ended March 2023 (FY2023) at its annual general meeting on 20 November.

The airline’s revenue increased 183% from R2 billion in FY2022 to R5.7 billion.

That resulted in a swing from a R1-billion loss before interest, tax, depreciation, and amortisation (Ebitda) in FY2022 to a positive Ebitda of R277 million and a net profit of R252 million.

In addition, the airline made its final legacy debt repayment and is therefore completely debt-free, leaving the door open for growth opportunities.

The board’s interim CEO professor John Lamola described the “pleasing” results as “emblematic of the hard and careful work that went into the relaunching of SAA as a reliable airline and globally admired brand.” 

“This has put SAA on a path to financial sustainability without reliance on the fiscus,” Lamola said.

“We have now entered a period of consolidation of the current route network and fleet strategy and are looking to the next phase of quantum growth as SAA renews its fleet to elevate its customer offering, open more intercontinental routes, and pursue its environmental sustainability goals.”

In operational terms, SAA has become a shadow of its former self, although the fact that it is no longer a drag on taxpayers is a welcome change in the status quo.

The airline completed a year-and-a-half-long business rescue process from late December 2019 to April 2021, which came with sweeping changes.

The airline was restructured to reduce its cost base, which included offloading its once-successful budget carrier Mango and retrenching thousands of employees.

At the start of FY 2024, it had 800 employees, compared with 4,708 at the start of its business rescue.

It currently leases 16 aircraft and flies less than two dozen flights per day, compared with 52 leased aircraft and over 20 flights a day when it entered business rescue in December 2019.

However, SAA plans to lease seven more aircraft in the next financial year, has slowly added new destinations and grew its staff complement to 2,000.

The airline’s routes have increased from nine to 16. Among the noteworthy additions was the return of its intercontinental route to Perth, Australia.

It also increased flight frequencies to Accra, Harare, Kinshasha, Lusaka, Lagos, and Mauritius.

Lack of political interference a big win

According to SAA interim board chair Derek Hanekom, the management and board no longer took instructions from politicians about its strategic direction.

Hanekom, a senior member of the ANC, was one of President Jacob Zuma’s most outspoken critics during the Gupta State Capture era.

The Zondo Commission of Inquiry found that political interference had played a role in SAA’s financial deterioration.

Among the most obvious examples was a conspiracy by two SAA directors and former public enterprises minister Malusi Gigaba to drop the airline’s profitable Johannesburg-Mumbai route so that the Gupta-linked Jet Airways could take it over.

SAA’s new board reported that it was no longer plagued by such issues.

While the return to profitability will be welcomed, it will take a long time for SAA to make up for its sins against the taxpayer.

In the five financial years from 2018 to 2023, the airline recorded a combined loss of nearly R29 billion and received R48 billion in bailouts.

R27.6 billion of the bailout money was used for the business rescue process.

Although transport minister Barbara Creecy and the SAA interim board has assured the airline will no longer require funding from government, it needs a private partner to ensure long-term success.

A previous plan by former public enterprises minister Pravin Gordhan to sell the airline to the Takatso consortium failed.

The airline was transferred to the Department of Transport following the dissolution of the Department of Public Enterprises after the formation of the Government of National Unity.

Creecy told Parliament that SAA would not be privatised but welcomed equity stakes from development financial institutions — like the Public Investment Corporation.

Such an approach could be controversial as it would involve investing government workers’ pension funds in the airline.

Hanekom also said the board had no “interest, desire or appetite” to privatise SAA as it believed the airline could again be a valuable asset to the South African economy.