Gigaba sets out SAA's tale of woe

The big message from the eventual presentation of SAA’s annual report for financial year 2011/12 on October 15 was that the airline had performed below expectations, and it did not fare well against other international carriers around the world faced with the same adverse global economic environment. For the year under review the airline increased its revenue from R22.6 billion to R23.8 bn, and yet still recorded an operating loss of R1.3 bn. The airline achieved only 13 out of the 29 key performance indicators of the shareholder compact, which constitutes only 44% of the key performance areas that have been met. What was worrying was that the majority of those targets that were not met related to the key performance areas of financial value creation or commercial objectives as stipulated by the sole shareholder, the government. This concerned public enterprises minister, Malusi Gigaba, who said: “This is a situation that is totally unacceptable as there are other very well run, competitive, sustainable, financially viable and even profitable state-owned national carriers and there is no reason why SAA should not be like them.” A grave concern for the government was the decline of the airline’s liquidity position over the last two years. The cash balance as at March 31, 2010 was R3.4 bn; which declined declined by R1.2 bn in the 2010/11 financial year and by a further R2.3 bn in the 2011/12 financial year. And, unlike its peers, which experienced an increase in the operating costs, SAA did not experience a corresponding increase in revenue. Said Gigaba: “On September 26, the minister of finance notified me of his decision to grant SAA a guarantee of R5 bn subject to stringent conditions which include the development of a turnaround strategy and funding plan for the long- and short-haul fleet.” He also gave the board three months to finalise the recruitment of the new CEO and to fill the other vacant executive positions without delay.