MPs seek answers on fresh SAA losses

MPs want to talk to Public Enterprises Minister Lynne Brown about the continued poor performance of the airline.

Parliament – South African Airways is still making a loss, though it had managed to slash it by 43 percent through cost savings, the top management of the national carrier on Wednesday told MPs who reacted with dismay across party lines.

“Although we still lost money, SAA’s year-to-year operating result had improved by 43 percent. Revenue is seven percent lower than the prior year, the reason for that is largely dropping fares throughout the industry, on the back of lower oil prices. We are experiencing a reduction in our revenues and it is a huge focus point going forward,” chief financial officer Wolf Meyer told Parliament’s finance committee.

“We did encounter a very difficult operating environment marked by increased competition … revenue pressures, for instance ebola and xenophobia, and also other external factors that we don’t have control over. An important one is the weakening currency that severely impacts our headline,” he said, adding that about 60 percent of SAA’s expenses were dollar-denominated.

Meyer said other financial burdens included an impairment of R1.2 billion the airline had to pay on delivery of ten aircraft over the past two years, as well as an increased reliance on state-guaranteed debt. It was forecast that SAA’s debt costs would come to R848 million in 2016.

The airline suffered operating losses of R374 million last year.

SAA chairwoman Dudu Myeni stressed several times that the carrier was paying a high price for market financing, on which it was dependent since Treasury closed the tap of cash injections, and also implied after a stinging rebuke from MPs, that she had not been in the position for very long, contrary to her colleagues at top management.

Myeni ignored a blunt question from Democratic Alliance finance spokesman David Maynier as to whether she would be prepared to resign, as well as another from him to tell the committee whether or not she had received an eleventh-hour phone call from President Jacob Zuma to call off a planned equity partnership agreement with Emirates Airlines, which would have seen more than R2 billion injected into the cash-strapped carrier.

“It appears to me chairperson that you are ground zero of the leadership problem at SAA and that it would be in the public interest and indeed in the interest of SAA if you resigned,” Maynier said.

Myeni commented that she had consistently been trying to challenge questionable financial choices at the airline but added that “when you introduce new things you become unpopular”.

After several ANC MPs also weighed in with scathing criticism of the company’s performance, committee chairman Yunus Carrim remarked that for once there was unanimity.

“Your answers appear very glib, with all due respect. There isn’t sufficient recognition of the gravity of the challenges you are facing,” the chairman of parliament’s finance committee Yunus Carrim commented after the three-hour briefing.

He said little appeared to have changed at SAA since the mid 2000s, despite a series of turnaround strategies.

“There is a different set of people here but it is almost a sense of deja vu.”

The committee concluded that it needed to call Public Enterprises Minister Lynne Brown to discuss the continued poor performance of SAA despite last year’s unveiling of a new corporate plan.

Meyer said since 2012 the airline had saved R2.2 billion through a “cost-compression” system that focused strongly on reducing costs related to aircraft.

“For the next two years we are looking at a target of 13 percent, so I think it is fair to say that cost reduction remains a target for the group.”

ANA