SOUTH AFRICA: South Africa Airways And South African Express In Financial Crisis

In its latest audited statements, the airline says it urgently needs more capital to pay its debts, and to re-fleet.

It's not only the national airline that needs more money to stay in the sky. It's smaller, regional counterpart South African (SA) Express says it also needs urgent capital to continue operating.

The audited financial statements of the regional airline for 2015/16 have been tabled in Parliament.

Last week it was revealed in the National Assembly that Cabinet is considering a R10 billion bail out to keep South African Airways (SAA) from defaulting on its loans.

Following hefty losses in 2014, SA Express surprisingly registered a post-tax profit of R16.9 million for the 2015/16 financial year.

But this was largely due to it being able to extend the repayment of a R121 million loan to 2023.

In its latest audited statements, the airline says it urgently needs more capital to pay its debts, and to re-fleet.

In June, the airline's executives told MPs that it was again expected to fall into the red when its 2016-2017 figures are audited.

The Democratic Alliances' (DA) Natasha Mazzone said: "We need to make sure they can pay their debt firstly and secondly that we can get this airline on some kind of trajectory that sees them running at a clean profit going forward."

MPs will be grappling with the figures at a meeting of the Public Accounts Committee later this week.

Finance Minister Malusi Gigaba says the government has not yet adopted any of the SAA recapitalisation proposals.

Finance Minister Malusi Gigaba says selling South African Airways (SAA)’s non-core assets are among the proposals being considered to raise funds to recapitalise the ailing airline.

Gigaba made the comments on Friday following a meeting with the CEO Initiative.

It emerged this week that government was considering selling its shares in Telkom to raise the capital to bail out the national carrier.

Gigaba says the government has not yet adopted any of the SAA recapitalisation proposals.

I would like to, therefore, caution against hysteria created by our considering of various options. Cabinet has appointed four ministers to look at various options to capitalise South African Airways.

He says apart from selling Telkom shares, there are other ideas on the table.

Such as the disposal of non-core assets, share equity, Private Public Partnerships and variety of other options that we’re going to be looking at.

Gigaba says the issue is being dealt with urgently.

SA Express says that like SAA, it will need a cash injection to keep their planes in the sky.

Government’s ailing regional airline SA Express will have to explain to Parliament this week why it’s incurred more than R30 million in fruitless and wasteful expenditure.

The airline’s latest audited financial statements reveal that while it made a R16 million profit in 2015/16, it also incurred an irregular expenditure of the same amount.

Chairperson of Parliament’s Standing Committee on Public Accounts (Scopa) Themba Godi says Members of Parliament (MPs) will be considering the financial position of the airline against the backdrop of talks of a merger with South African Airways (SAA).

SA Express says its short to long term debt is hampering its profitability and its weak balance sheet means it also can’t raise any more cash.

Scopa chairperson Themba Godi said: Their audit is not proving to be an improvement but a worsening situation.

But it’s the airline’s irregular, fruitless and wasteful expenditure that Scopa really wants to probe.

The airline says it won’t be able to recover the more than R30 million in fruitless and wasteful expenditure because it was incurred on interest and penalties as a result of its poor cash flow.

If you have an entity that’s basically ailing you can’t then have fruitless and wasteful expenditure of whatever quantity.

The airline says that like SAA, it will need a cash injection to keep their planes in the sky.

The Democratic Alliance (DA) in Parliament revealed that government may give South African Airways (SAA) another bailout to the tune of R10 billion.

Stephen Grootes spoke to Scopa chair Themba Godi who says the proceedings regarding the plan that is being considered to bail out SAA is only the beginning in tackling the problems facing the airline.



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SOUTH AFRICA: SAA, Mango And SA Express To Merge

It is unclear what a merger between the three state-owned airlines SAA, Mango and SA Express would achieve that cannot be achieved by each airline individually, Erik Venter, CEO of Comair said.

This was in reaction to a parliamentary response by Public Enterprises Minister Lynne Brown. Brown said it will cost government R12.1m to make use of the services of Bain and Company, the Boston-based consultancy firm appointed to manage such a merger.

“Mango is already a 100% subsidiary of SAA and SAA ensures that its flights do not overlap with those of SA Express. So I do not see any structural change to the network or capacity arising from the merger,” said Venter.

“The airlines already make common use of some of SAA’s back office systems and airport staff, for instance, so I do not see any meaningful saving in overheads arising specifically from a merger.”

At the same time, a merger might consolidate three boards of directors into one and might concentrate control under one CEO, added Venter.

In her parliamentary response Brown said the scope of the work entails the development of an “optimal corporate structure to re-align the state-owned airlines” and that the consultancy will take cognisance of industry best practices.

In October 2016 at a meeting of the Airlines Association of Southern Africa in Namibia, Brown said airlines worldwide were compelled to restructure their operations to address inefficiencies and remain relevant to the markets they serve.

She emphasised though that the “strategic intent” of government is to maintain control and oversight of the state airlines. She said a holding company for the three separate airlines could be created, or they could be merged into one entity. Another possibility would be to sell a 25% stake in the newly formed holding company to a strategic partner.

There have been several calls from business and opposition parties for the national carrier to be privatised.

SAA has in the past two financial years made a combined financial loss of over R7bn, while Mango recorded a loss of R36.9m in the financial year to the end of February 2016.

Both SAA and SA Express are surviving on state debt guarantees at a time when the government is trying to rein in spending and raise revenue amid slowing economic growth.

SA Civil Aviation Authority Lifts SA Express’ Suspension

The South African Civil Aviation Authority (SACAA) has lifted the suspension of SA Express’ Air Operator Certificate (AOC). This means that the airline may, with immediate effect, resume operating their fleet of 26 aircraft.

The lifting of the suspension comes a day after the operator’s AOC privileges were temporarily withdrawn by the SACAA, after recent inspections and audits revealed deficiencies relating to the operator’s safety monitoring systems.

Following several and intensive engagements between the airline and the Regulator; SA Express provided the SACAA with a revised corrective action plan, which upon perusal and consideration was found to address the major concerns that were raised by the Regulator.

Whilst the suspension has been lifted, the SACAA will still continue to monitor and oversee the full implementation of SA Express’ corrective action plan. The SACAA will also intensify its oversight of the airline’s entire operation.

Oversight inspections and audits by regulators are done on a sample basis, and as such operators need to make sure that they have adequate safety management systems in place that can enhance and promote the levels of safety.

The SACAA wishes to reiterate that aviation safety and security is critical, and operators need to always ensure that their operations are safe and secure. Commercial gains should never supersede the safety of the crew, passengers, and the general public.

The SACAA, in line with its mandate, will continue to effectively regulate and oversee civil aviation activities in the country. South Africans can be assured that their country’s aviation safety and security standards meet, and in some instances, exceed the minimum global requirements, and thus compares favourably in terms of alignment with the best international standards and practices.

It is important to note that suspensions and withdrawals of license holders’ privileges are never an instant action or any form of reprisal by the regulator. Such a decision is usually preceded by comprehensive engagements and attempts by the regulator to highlight deficiencies and help license holders to comply with the prescribed standards and applicable regulations.

Suspensions are therefore precautionary measures aimed at avoiding catastrophic incidences. Moreover, aviation and the airline industry specifically is a 24-hours operation, and therefore there is never such a thing as an appropriate time to suspend operations.

The SACAA will continue to work with all license holders to ensure that safety practices continue to be engraved in the DNA of each entity and operation; because it is a fact that aircraft accidents, as a result of negligence or otherwise, can have a devastating effect not only on the business of operators or country, but also to the families of those that use air transport services.

Lufthansa Technick’s Total Supports Safair

The South African carrier Safair has contracted Lufthansa Technik to provide comprehensive component support. The corresponding Total Component Support TCS® contract covers component maintenance, repair, overhaul as well as access to an adequate pool of spares. Effective from 1 April the contract comprises the support for up to five Boeing 737 Next Generation aircraft operated by Safair’s low-cost airline FlySafair.

With this contract, Lufthansa Technik further strengthens its presence in the African market where airlines such as Kenya Airways, RwandAir, South African Airways and SA Express are already relying on Lufthansa Technik’s wide-ranging services.

Lufthansa Technik Total Component Support TCS® is the perfect solution for operators that want optimal component availability without the task of setting up and maintaining their own spare parts inventories. Customers benefit from a unique pooling concept: Lufthansa Technik stocks more than 100,000 components and guarantees 100 percent reliable delivery at a pre-determined service level. Members of the Lufthansa Technik TCS® pool also benefit from reductions in operating costs through economies of scale.

The low-cost South African airline FlySafair began operations in 2014, serving six domestic destinations from the airline’s hub in Johannesburg.

SOUTH AFRICA: SA Express Suspension Lifted

The South African Civil Aviation Authority (SACAA) has lifted the suspension of SA Express’ Air Operator Certificate (AOC).

This means that the airline may, with immediate effect, resume operating their fleet of 26 aircraft. The lifting of the suspension comes a day after the operator’s AOC privileges were temporarily withdrawn by the SACAA, after recent inspections and audits revealed deficiencies relating to the operator’s safety monitoring systems.

The Regulator said following several and intensive engagements with the airline, it had provided the SACAA with a revised corrective action plan, which upon perusal and consideration was found to address the major concerns that were raised by the Regulator".

The SACAA said it will continue to intensively monitor and oversee the full implementation of SA Express’ corrective action plan.

It added that suspensions and withdrawals of license holders’ privileges are never an instant action or any form of reprisal by the regulator.

"Such a decision is usually preceded by comprehensive engagements and attempts by the regulator to highlight deficiencies and help license holders to comply with the prescribed standards and applicable regulations. Suspensions are therefore precautionary measures aimed at avoiding catastrophic incidences. Moreover, aviation and the airline industry specifically is a 24-hours operation, and therefore there is never such a thing as an appropriate time to suspend operations."

The suspension came after the airline had failed to submit satisfactory corrective measures, after two failed audits on 19 and 20 April. As a result the airline's operations were suspended in the middle of the long-weekend, leaving hundreds of passengers stranded and scrambling to make alternative arrangements.

SOUTH AFRICA: South African Airways Celebrates 20 Years Flying To Tanzania

South African Airways has been flying between Johannesburg and Dar Es Salaam in Tanazania since 1995 and now offers twice daily flights between these two cities. The relaxing of visas requirements in 2013 for South African passport holders on business or holiday in Tanzania has significantly aided tourism.

South African Airways is the leading carrier in Africa, serving 56 destinations and is in partnership with SA Express, SA Airlink and its low cost carrier, Mango. The route Johannesburg to Dar Es Salaam flights are operated by SAA's new A320s or A319s.