Business | Business News
With SAA’s future still in limbo and the call for government to wash its hands of the cash-strapped flag carrier growing louder, an expert on aviation finance says there is still a strong case to be made for a state-owned airline.
On Monday, business rescue practitioners Siviwe Dongwana and Les Matuso – who were last year appointed to try and salvage SAA – again requested more time to submit their plan of action to rescue the ailing airline.
They have already been granted four extensions since missing the original deadline.
A draft plan that was last week leaked and proposed more government bailouts totalling R4.6 billion, has been criticised by the likes of the Democratic Alliance.
In a statement, the party said SAA would “continue to be a fiscal blackhole for years to come” if the plan was approved in its current form. It charged that the only “credible course of action” was liquidation.
The head of aviation finance at Nedbank, James Geldenhuys, says South Africans are tired of the SAA debacle – and understandably so.
“Over the years, this negative view of SAA has formed as a result of the allegations around mismanagement and corruption and the money that’s been invested in the airline,” he said in an interview with The Citizen. “We’ve also just come through a very difficult time with the previous presidency and South Africans have lost faith in the system.”
While Geldenhuys said government had put in place various important measures to try and “fix” SAA, he said these efforts had in some instances proved counterproductive.
“Government really has pulled out all the stops with extra control measures and such, but it’s slowing down the decision-making process and when decisions are slow, it’s costly for an airline. The big thing for an airline is agility. When you see an opportunity you need to be able to jump on it and you need to be empowered to do so,” he said.
The idea of privatising SAA had become more and more popular in recent years because it was perceived as an “out”, Geldenhuys said.
But, he went on, the repercussions could be far-reaching.
It came down to the conflicting objectives of a state-owned airline and a privately-owned airline.
“A state-owned airline’s objectives might include, for example, connectivity for citizens, connectivity with important trade partners and tourism,” he said. “In this country, in particular, tourism is incredibly important and SAA’s role in the sector is often overlooked.”
On the other hand, Geldenhuys said, privately-owned airlines had the same objectives as “normal” business: growth and cash generation.
“And that means if a route doesn’t make money, they’re not going to fly it”.
Geldenhuys said less popular routes were sometimes nonetheless important for the broader economy.
“As an example, everyone benefits from an investor flying into the country for a meeting and deciding to invest their money here,” he said.
“We tend to think it’s just about people flying, but it’s not. It’s about why people are flying and the money they’re bringing in and even the cargo that’s being transported.”
Geldenhuys said going forward, transparency and accountability were key and that government needed to earn the populace’s trust again.
“People tend to think that they can get away with things so we need accountability”.
He said the North Gauteng High Court’s recent decision to declare former SAA chair Dudu Myeni a delinquent director for life would “send a message”.
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