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The Future of SAA and its Subsidiaries

South African Airways (SAA) is a good airline but a poorly run business. Bad decisions were made by previous boards and management, including allowing corruption to incapacitate the airline, according to Minister Pravin Gordhan.

Against this background, the immediate priority for the Ministry of Public Enterprises is to stabilise SAA financially and through a rigorous process of cost-reduction and commercial re-orientation, to turn it into an airline that is financially and operationally sustainable.

This view is in stark contrast to the view held by Minister Tito Mboweni, who believes the Airline should be closed down as it is has for years now been a drain on government resources as it has consistently lost money and had to go back to the government, cap in hand, to keep the lights on.

SAA last showed a profit back in 2011 with the airline costing taxpayers R30 billion since 2012 to keep their aircraft in the air. Stories of mismanagement and wasteful spending seem to be a regular feature of the news cycle, and despite all of the losses, the management seemed happy to be earning bigger and bigger salaries.

“Why I say close it down is because it’s unlikely that you are going to find any private sector equity partner who will come join this asset.” Mr Mboweni said in the USA recently.

Cognisant of the challenges confronting the airline, Minister Gordhan will place the board and management on notice to discharge, with a greater sense of urgency and dedication, their professional duties to identify and implement immediate interventions.

The recent appropriation of R5bn in the Medium Term Budget Policy Statement was a further expression of this intent and provides a degree of immediate financial stability while the airline’s board and management proceed with the task restore the airline financially and operationally.

“It is imperative that the executive management apply its mind with clear focus to the immediate task at hand, including addressing the airline’s cost-base, stopping all fraudulent contracts, disciplining and instituting appropriate civil and criminal actions against all persons inside and outside the business who are implicated in corruption, and preparing SAA for a strategic equity partner in the near future” Minister Gordhan announced in a media release.

Its seems that the challenges are not only affecting the Airline, but its subsidiaries as well, it has recently come to light that Mango Airlines will be sending their Boeing 737-800 to a company based in Jordan for “C” Checks.

This is performed approximately every 24-36 months or a specific number of actual flight hours or as defined by the manufacturer, which in the case of a B737-800 is between 4000 and 6000 Flying Hours.

This maintenance check requires a large majority of the aircraft's components to be inspected. This puts the aircraft out of service, and the aircraft must not leave the maintenance site until it is completed. The time needed to complete such a check is at least 3 weeks and the effort involved can require up to 6,000 man-hours.

As a result, it's reported that, Mango are to lease an Airbus A320 from Global Airlines for the duration of the fleet maintenance which could run for a year if each B737 of the Mango fleet are sent abroad.

This raises many questions as to the capability of the embattled SAA Technical to maintain the current fleet to the required standard.

SAA Technical was recently reported to be “under siege from its employees who are looting brazenly and this looting has become a culture run by a syndicate of people from the bottom right to the top.”according to Themba Godi‚ chairman of the Standing Committee on Public Accounts (Scopa)

SAA Technical claim to be the sole provider of aircraft maintenance to SAA, Mango and Comair/Kulula.

Comair announced in May 2018 that they will be perusing a maintenance agreement with Lufthansa Technik for their fleet and it seems as if major maintenance on the Mango fleet is will also be outsourced in future.

To compound matters SA Express was recently grounded and their certificate of airworthiness withdrawn by the South African Civil Aviation Authority (SACAA). This grounding led to the transfer of many of the SA Express technicians to SAA Technical.