NEWS
11/07/2018 12:06 SAST | Updated 11/07/2018 12:55 SAST

SAA Is In So Much Trouble, It's Now Looking For An Equity Partner To Bail It Out

According to reports, the airline hasn't made a profit since 2011.

This week, SAA CEO Vuyani Jarana announced that the company would start looking for an equity partner immediately, Business Day has reported. The carrier is looking for a buyer of a stake in SAA so that it can cut losses.

It is not clear how big this stake will be, or when the sale will happen.

But according to Business Day, it is happening in response to an application by trade union Solidarity to have the airline placed in business rescue.

According to the Solidarity application, SAA is effectively insolvent, and has been for some time. It only survives because of government bailouts, Solidarity said.

The application reportedly led to talks with the union, and SAA agreed to parts of its demands, which reportedly included part-privatisation and limiting political interference in the running of the airline.

According to the Financial Mail, SAA hasn't made a profit since 2011, and the company made a loss of R5.6-billion last year.

In February, it reportedly halved the number of flights from Johannesburg to London, following the reduction in the number of flights to some African capitals.

Newly appointed CEO Vuyani Jarana has admitted that the airline is in trouble — although he says it can turn a profit in four years. But he stopped short of calling the problems the result of state capture.

He said a number of investigative reports had been received by the airline, and more investigations would follow.

In June 2017, the South African Cabin Crew Association (Sacca) held a press conference in which it said it had evidence of wide-scale looting at the carrier. The union reportedly said there were at least 34 contracts that had been highlighted in various independent investigations, but the problem was being ignored.

This included a report by Ernst & Young, which investigated 48 large contracts at SAA.

In August 2017, the BBC reported that an SAA cashflow statement given to MPs showed that the airline was on the brink of bankruptcy.

Treasury granted SAA a R3-billion loan in October 2017 to prevent it from defaulting on a loan from Citibank. According to Fin24, this followed another R2.2-billion loan already handed out to SAA earlier last year.