State-owned airline, South African Airways (SAA) is set to implement reconstruction plans in a bid to salvage the struggling state of the airline. This was revealed by the Chief Executive Officer of SAA, Vuyani Jarana on Monday during a briefing.
Jarana said the airline would be divided into three different units; domestic, regional and international business. To increase accountability and efficiency, each unit would have its own management. The reconstruction may also involve the partial sale of its catering unit, Air Chefs.
In recent times South African Airways has been faced with several challenges including poor financial performance. The latest figures for 2017 show a loss of R2.76 billion ($192 million) despite government support totalling R30 billion ($2 billion) in the last five years.
Quite recently, the state-owned airline was ordered to pay its rival, Comair 1.1 billion Rand ($78 million) to settle an anti-competition case. The dispute between Comair and SAA dates back to more than a decade ago. SAA’s travel agent incentive schemes were deemed anti-competitive by a competition body, paving the way for a damages claim by Comair.
SAA is one of the state-owned firms cited by credit rating agencies as a big risk to Africa’s most industrialized economy. Last year, South Africa’s finance minister, Tito Mboweni suggested that the best course of action is to simply shut the airline
Air transport is a very important factor in achieving growth and development in any nation. It facilitates integration into the global economy and provides vital connectivity on a national, regional, and international scale. It also helps to generate trade, promotes tourism, and creates employment opportunities. Therefore it is believed that SAA’s reconstruction plans would help to fully revive the airline.
But while this may bring about a turnaround in the financial performance of the airline, it may not exactly proffer a permanent solution.
The approved 2019/2023 corporate plan of the SAA forecasts that the airline will incur financial losses of R5.2 billion and R1.9 billion for the financial years 2018/19 and 2019/20, respectively and thereafter SAA expects to be profitable for the remainder of the five-year period. This means that the airline would not start making any profits till 2021 and this can only be possible through the reconstruction.