SAA is banking on the Middle East crisis being resolved soon to avoid derailing its steady recovery from business rescue and a bruising restructuring, new group CEO Matshela Seshibe says.
One of the national carrier’s priorities is fixing the governance weaknesses that earned it a disclaimer with findings from the auditor-general, meaning its financial statements were in such a poor state that auditors could not rely on them to form an opinion.
As with other airlines, SAA’s costs have escalated since the US-Israel war against Iran started in late February after a surge in the cost of jet fuel, which contributes almost 30% to the price of an air ticket, Seshibe told Business Day.
He succeeded John Lamola who suddenly quit as CEO last month.
The price of aviation fuel has soared more than 140% since the start of the hostilities, he said, adding: “We are watching very closely the daily movement in the price of fuel and we have made significant changes to our cost model, our value chain model as well as asked passengers to partner with us to cushion the impact of the fare increases.”
SAA ticket sales have dipped mainly due to “value” travellers on domestic routes.
“With business travellers, government travellers, as well as overseas travellers who had booked way before, the demand is holding steady,” Seshibe said.
“Value travellers who were buying [tickets] because of the better economics of the airline versus driving are having to make tough choices. There was a point before the start of the hostilities when it would be cheaper to fly to a place like Durban than to drive your own car. Consumers will continue to make those trade-offs.
“Demand at that level is currently challenged. We are monitoring it on an ongoing basis and hence the need for day-to-day management and monitoring and reporting to make sure that we do not come out in a net negative position.”
SAA has made “strategic adjustments” in markets where demand is traditionally low or the cost base does not justify flying under present conditions.
“We have reduced the frequency to Gaborone from two to one. We have reduced the frequencies on the Cape Town route and we are looking at markets in terms of timing of travel,” Seshibe said.
Like thousands of executives in the industry he is hoping the conflict is resolved soon so that SAA can resume its recovery after emerging from business rescue in April 2021, a process that started in December 2019.
“Every airline is scrambling for cash. If the oil price were to reach certain levels it would have a negative effect on demand and on the cost structures of airlines,” Seshibe said.
“As it stands … with our current assumptions and our current strategies, the current partnership levels we have, SAA’s business fundamentals are solid, and we are confident as a management team that we’ve got a model that will sustain for a long period.”
The airline is still grappling with governance and financial reporting shortcomings, with a team from the auditor-general’s office telling parliament last month that an audit of SAA’s 2024/25 financial year revealed “inferior” financial statements, revenue leakages, significant internal control deficiencies and billing inefficiencies.
There has been speculation in media reports that the airline is in renewed financial dire straits.
“We do not discount the basis on which the speculations arise, but we want to put it in context. They are based on performance up to the 31st of March 2025. It’s a backward-looking speculation,” Seshibe said.
“We believe that with the current partners we have throughout the value chain — the suppliers, the agents, the passengers, even the bankers and the shareholder — that the SAA business fundamentals are strong and that it will be sustainable for the [future].
“Governance is one of the key priorities for this company for this year. We’ve just started the financial year in April. The building blocks that are going to give us an improvement in F27 [financial year 2027] are being put in place.”
The airline has grown its workforce to about 1,700 after slashing it to 500 during an aggressive restructuring after the business rescue.
“It has grown on a compound scale of [about] 30%. It’s almost a business now that is generating north of R10bn in revenue. It’s a significant growth,” Seshibe said.
“Unfortunately, the growth on the top line was not matched by the maturity of the record-keeping in finance and that was reflected in the auditor-general’s report. We are working on this.”
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