SAA 'technically insolvent' and exploring emergency funding options
South African Airways (SAA) is exploring emergency funding options as part of a 90-day action plan intended to restore the state-owned carrier to solvency after it confirmed today that it is “technically insolvent”.
“SAA is serious about rebuilding commercial sustainability and we will achieve our objectives,” said acting CEO Nico Bezuidenhout. “Tasks completed already include a review of the SAA long-haul international network as well as a re-evaluation of fleet requirements.”
The airline confirmed it is now reliant on government guarantees, which stand at 1.2 billion.
“SAA has been reliant on guarantees from its shareholder [the South African government] for several years and the delay in the release of the financial statements for the 2013/14 financial year is directly related to the continued weakness of the company’s balance sheet and due to the company being technically insolvent,” SAA said in a statement.
Earlier this month, South Africa guaranteed another $565 million for SAA so its results for the year ended March 2014 could finally be released.
Revenues for the year rose 12% to R30.3 billion and its EBITDA loss narrowed 12% to R374 million.
Long haul activities were seen as the major issue for the airline. Profits from domestic flights rose 10% while the contribution from regional flying was up 17% and its budget arm Mango - which was run by Bezuidenhout until he was pulled back to SAA for the acting CEO role - also reported record profits.
SAA is ending flights to Mumbai and Beijing, to help stem "substantial losses,” and passing the passenger traffic to codeshare partners Etihad and Air China. It will increase its regional activities, the airline said.