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.