South African Airways Prepares To Launch Turnaround Plan

 - August 1, 2017, 9:00 AM

The management of South African Airways (SAA) has formulated a turnaround strategy aimed at taking the loss-making airline back to profitability in the coming five years. One of the oldest airlines in Africa, SAA has suffered through turbulent times in recent years. The airline has lost money in each of the past seven years and witnessed frequent changes of management and board. The existing executive management of the airline—led by acting CEO Musa Zwane—has worked on developing a plan to reverse its fortunes since January.    

“We are right at a point to start strategic implementation,” Zwane told AIN. “Obviously there are quite a lot of challenges in terms of the airline's profitability at the moment and the strategy seeks to address that.”  

Zwane said the plan addresses a number of key pillars, including liquidity, balance sheet, costs and revenue issues. “The important thing at these key items is to see how we can take the airline back to profitability, addressing each and every one of the issues,” he said.

According to the acting CEO, the management plans to break even in its 2018-2019 fiscal year. “It needs a little bit of work,” noted. “And it also requires capital injection from the government.”

SAA’s debt continues to mount and the South African government is considering a loan guarantee to keep the airline afloat. The state has already committed to the airline 19.1 billion rand ($1.46 billion) in guarantees, a safety net that has kept SAA solvent after seven consecutive unprofitable years.  

Zwane said the management is looking at ways to reduce the company’s expenditures while ensuring more revenue by introducing new routes and closing the loss-making markets.

“We have to use all the possible means to bring our costs down,” Zwane told AIN. “That is the key aspect of the plan. ”   

Zwane also said that he does not favor staff retrenchment. “At the moment we are looking at what we can do without laying down labor,” he explained.

Meanwhile, SAA harbors no plans to expand its fleet due to its precarious financial position. “We will be looking at how best we can utilize our fleet through partnership with other airlines and also through [grounding] some of the old fleet and improving the utilization of the new airplanes,” said Zwane.

The board has begun to the process of hiring a new CEO. Zwane, who has served as acting CEO since November 2015, said he harbors no interest in taking the helm.