SAA will be split into three, says CEO

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Photo: ANA

State-owned airline South African Airways (SAA) will be splitting into three separate entities, responsible for handling their domestic, regional, and international flight routes, CEO Vuyani Jarana has announced, EWN reports.

Each unit will have independent management, according to Jarana.

The struggling airline was bailed out by the government last year, with R5 billion allocated in the medium-term budget policy statement (MTBPS) to help it face a looming debt crisis.

The airline currently has R19.1 billion worth of government guarantees, of which R14.5 billion has been used and in March next year, one billion of this will be maturing.

The government says the new allocation is to help SAA repay this debt.

“In general, SAA is not generating sufficient cash to repay its total debt and will have to negotiate with lenders to refinance or extend maturity dates.”

The airline is the second state-owned enterprise to undergo a split, with President Cyril Ramaphosa having announced the unbundling of Eskom at his second state of the nation address on February 8.

“To bring credibility to the turnaround and to position South Africa’s power sector for the future, we shall immediately embark on a process of establishing three separate entities – generation, transmission and distribution – under Eskom Holdings,” said Ramaphosa.

“This business model needs to take into account the root causes of its current crisis and the profound international and local changes in the relative costs, and market penetration of energy resources, especially clean technologies.”

In the short term, Ramaphosa said the state-owned entity would need to reduce its costs, and raise revenue through tariff increases that were also affordable for South Africa.

Ramaphosa also hinted at another possible bailout for the struggling company.

“Government will support Eskom’s balance sheet, and the minister of finance will provide further details on this in the budget speech.”

The unbundling has been opposed by unions, who claim that it is the path towards privatising the state-owned utility and will lead to job losses, something the president, as well as others such as Minister of Public Enterprises Pravin Gordhan, have strongly denied.

Compiled by Daniel Friedman / Additional reporting by ANA / The Citizen