A "transition plan" drawn up by the former board of directors of South African Airways (SAA) has indicated that the airline will report a loss of R1.25bn for the past financial year, while the airline’s liabilities exceed its assets by 359%.
The airline was granted a R5bn government guarantee last week that will allow it to continue borrowing and keep flying but there are concerns that this will not be enough and the Department of Public Enterprises has conceded that more money will be needed from the Treasury to support the carrier.
The transition plan stated: "SAA’s balance sheet was weak in 2009 and the carrier’s financial position has continued to atrophy despite a range of operational improvements," it said. "SAA remains inadequately capitalised with a current debt-to-equity ratio of -359%. As a result, the group cannot adequately support the growth strategy at the centre of the 2012-15 corporate plan, or navigate cyclical adverse trading conditions."
Such a weak balance sheet will make it difficult if not impossible to fund the acquisition of new, more fuel-efficient aircraft or to cater for the government’s expansion ambitions for the airline. The board has proposed that R2bn be invested on the fleet.
Over the next five years, SAA is expecting to take delivery of 20 Airbus A320s for domestic flights. To achieve its goals, SAA would need to lease six new A350 aircraft as soon as possible, and be able to take delivery of the aircraft between 2016 and 2018.
SAA transition plan shows crippling losses
