SAA is working on a business plan that will ensure all its cash requirements are funded via capital markets and not by the National Treasury, says John Lamola, interim CEO of the state-owned flag carrier.
“It is important to note that what we will present to the capital markets has nothing to do with SAA having an equity player or not. We are looking for a funding plan where we are not depending on National Treasury and ... we are ensuring that SAA will have a cash buffer going forward — like any other business. We also want to produce an operating profit,” Lamola told Business Day on the sidelines of the recent AGM and summit of the International Air Transport Association (Iata), which was hosted by Emirates Airline in Dubai.
The idea of having SAA no longer relying on bailouts from the state was a major reason for the proposed strategic equity partnership between the airline and the Takatso Consortium. Takatso was supposed to obtain 51% of the shareholding of SAA and provide a R3bn cash injection to ensure no further Treasury bailouts were needed. However, after a lengthy process during which minister of public enterprises Pravin Gordhan tried to get the deal approved, he had to announce in March that it would not go ahead.
Business strategy
Lamola said SAA was now creating a solid strategy for its journey ahead. “We have a business strategy, which we are reviewing following the demise of the Takatso transaction.
“We will present this reviewed corporate plan to the shareholder [the department of public enterprises] and National Treasury. Currently, we are stress-testing the plan to check if it will be acceptable to the capital markets,” said Lamola.
He pointed out that thanks to the business rescue process SAA underwent, which cleaned up the balance sheet, it was now debt-free. “As SAA emerged out of business rescue, we retained the confidence of the aircraft lessors. Our relationship with them ensured SAA could lease aircraft on favourable terms,” said Lamola.
At the Iata summit, Lamola spoke to representatives of Air China and Air India about possible ways they could collaborate to expand routes to Latin America. SAA also wants to see if it can offer access to Sydney, Australia, and at the summit Lamola spoke to representatives of Singapore Airlines in this regard.
At present SAA is operating only two intercontinental routes: to Perth in Australia and to Sao Paulo in Brazil. Lamola is pleased with the performance of both these routes and said there was demand for the airline to cover Sydney as well.
Expansions
SAA is also keen to restart routes to Europe, especially to Germany. However, Lamola made it clear that the airline would delay any major intercontinental route expansions while its strategic business plan was being presented to capital markets.
By the middle of 2025, SAA plans to have increased its fleet from 13 aircraft to 21, of which only two will be wholly owned and the rest mainly leased. It is continuing with its wet-lease agreement (the short-term lease of an aircraft with crew and maintenance) with Turkish-based SunExpress.
“During the winter season in Europe, when they do not need as many aircraft, they will deploy them with us as it will be our high-demand summer season,” said Lamola.
The regional market in Africa was SAA’s most lucrative, and the airline was focusing a lot of resources there, he said. SAA plans to add three more routes on the continent this financial year but has not revealed which routes they will be.
SAA flies to 12 destinations in Africa, including Accra, Lagos, Kinshasa, Lusaka and Mauritius. SAA would also like to increase frequencies on some of its African routes.
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