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South African Airways – What now?

SAA’s “Turnaround Strategy” was dealt a massive blow last week it was revealed that matters had finally been concluded between Comair and SAA, The National Carrier would begin payments of R1.1 billion, plus legal fees, from the end of March until July 2022.

Comair, who operate both British Airways and Kulula in South Africa, called SAA to account based on the accusation that the national carrier was guilty of anticompetitive behaviour in 2006. The crux of the argument, from Comair’s perspective, was that SAA had been issuing incentives to travel agencies that diverted customers towards them and away from competitors.

Excluding the legal costs SAA is expected to pay around R28.9 million per month. This is a heavy blow as SAA is already on the verge of collapse.

The national Carrier did reveal that the settlement plan was proposed by them. This, according to SAA’s CEO, Vuyani Jurana, is the first step in revamping operations at the struggling SOE.

Finance Minister, Tito Mboweni, is expected to address the matter and indicate where this money is going to come from in his Budget Speech tomorrow, the burning question is will the South African tax payer end up carrying the can for this miss-step by SAA management?

On Monday, Jurana, revealed a plan that SAA is to split of into three units, domestic, regional and international business units, each with their own management structure. “We want to build a new SAA, fit for the future, place the right people in the right jobs,” Jurana enthusiastically stated.

This seems like duplication or rather a triplication of the costs at senior management. The plan could be of great benefit if SAA take the opportunity to remove “dead wood” from their management structure and streamline the operation with only the best of the current workforce. This way the human cost to company can be drastically reduced we all know that the unions would not take this lightly and it could lead to a major HR nightmare.

The cost of keeping SAA afloat has reached staggering proportions over the last few years, R29 billion had been spent from 1999 – 2017. The single biggest payment made to SAA in that time was a hefty R6.5 billion. A further R10 billion in bailouts has been secured since then, taking their total to R39.3 billion.

Shortly after securing a R5 billion government bailout November 2018, it took company executives little over a month to return stating imminent financial ruin and demanding more financial support.

We anxiously await the budget speech to find out what is in store for the ailing SEO, will it be the end of the line for the National Carrier or will the tax payer once again have to come to the rescue.


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