South African Airways (SAA) has spent its R5 billion government bailout in just one month but says it needs much more money to stay airborne.
Not too long ago, during his mid-term Budget Speech, Finance Minister Tito Mboweni begrudgingly admitted that government would, once again, replenish SAA’s beleaguered bank account with R5 billion.
SAA’s R5 billion blowout
Mboweni later said that the national carrier should be shut down as it’s a financial burden on the state. A month later, Adrian Lackay, the spokesperson for the Ministry of Public Enterprises, said that government was both unwilling and unable to continue bailing the embattled company out of its self-imposed financial despair.
Yet, the horror of Mboweni’s allowance announcement on 24 October has been overshadowed by the state owned enterprises’ spectacular spending spree.
By 10 November, SAA’s CEO, Vuyani Jarana, admitted that the company had already spent R3 billion of the bailout to cover urgent debts. Almost three weeks later, while addressing members of parliament, both Jarana and the airline’s CFO, Deon Fredericks, confirmed that the remaining R2 billion had been spent on further “practical capital requirements”.
While the R5 billion bailout was intended to pull SAA out of the doldrums of economic collapse, company executives have, once again, approached government, cap-in-hand, crying imminent financial ruin.
How much money does SAA really need to ‘turn it around’?
According to a report penned by Carol Paton and published by Business Day, SAA will require another R16.7 billion from the government in order to avert complete financial and operational collapse. This bailout is expected to take the form of both capital and loan guarantees.
SAA needs R3.5 billion immediately, as in, before the end of the year. The embattled airline needs a further R4 billion by March. The rest of the funds are to cover exorbitant debts which are expected to mature in four months.
As unbelievable as it sounds, this means that SAA will have burnt through R8.5 billion in less than three months.
More shocking is the fact that, even with these gigantic government bailouts, the national airline has pushed its projected ‘break-even’ date back even further. Fredericks explained that the company had banked on an average oil price of $45 a barrel, when, in reality, the price hovered around $75 a barrel for most of the year. SAA says it will begin to turn a profit in 2021.
During its parliamentary presentation, the SAA board explained that the airline was due to make a loss of R5.2 billion in 2019 and another loss of R1.9 billion in 2020.
article by The South African