South African Airways on recapitalisation path


“This strategy was developed by a combination of members of the board as well as management. That means there’s ownership, accountability and pride towards the strategy. The second reason is that the strategy touches on what I refer to as the heart of what a successful airline is about,” South African Airways (SAA) CEO Monwabisi Kalawe told CNBC Africa.

“It addresses cost containment issues, networks, alliances, as well as refitting of the airline. It also most importantly addresses issues relating to growth. Those would be the key reasons why the strategy is unique.”

SAA’s return to profitability has resulted in negative equity due to a weak balance sheet.

Kalawe added that that the first step in creating the turnaround would be through the engagement of shareholders. This is to ensure balance sheet recapitalisation.

There has also been a proposal for the airline to merge its subsidiaries as another means of recapitalisation.

The demise of a number of local competitors has however significantly damaged the reputation of the national airline industry.

Low-cost carriers 1time, Nationwide and Velvet Sky have been among the airlines that ceased operations between 2008 and 2012.

1time could however return to the local airspace after a 15 million rand offer from PAK Africa Aviation, a Pakistani-backed aviation company.

“What we are proposing is to move into a new holdings group structure, and within this new structure we’ll be creating specific units of focus. We’ll create an airline group made of SAA, SA Express as well as Mango. We’ll have a unit that focuses on maintenance, a unit that focuses on logistics, in this case it would be SA Cargos as well as Air Chefs, and the last one would focus on our travel centre,” Kalawe explained.

Each of the businesses will focus on driving efficiency, which Kalawe hopes will result in the improvement of prices for users of the airline’s facilities.

New routes within the continent will also be introduced. Routes outside of Africa are however making losses, and discussions will be underway to determine whether to keep the routes or cease some of their operations.

“In our planning, we’re targeting to turn the airline around, show profits in the period of between four to five years. That’s our target at this stage. We believe there’s a future for national airlines. They tend to be very successful in cities or countries where there’s a hollow state-evasion policy. That means all the relevant government departments, whose focus is to improve economic performance of a country or a city, work together,” said Kalawe.

“In those environments, national airlines tend to be very successful. In fact, the hollow state-evasion policy is something that is built into our strategy to ensure that we have a successful airline.”