South African Airways needs ‘billions’ for turnaround

South African Airways Ltd., the country’s state-controlled carrier, needs “billions” of rand in government funding and won’t break even for four to five years, Chief Executive Officer Monwabisi Kalawe said.
The financing could come as a guarantee or a capital injection, Kalawe said in an interview with Bloomberg Africa TV over the weekend. “Like any company whether it’s a private company or a publicly listed company — at some stage you go to your shareholders for financial assistance,” he said. “That’s what we’re doing.”
SAA, as Africa’s biggest carrier is known, is battling with loss-making routes, an aging fleet, rising fuel costs and a weak balance sheet. Its earnings report for the full year through March has been delayed amid discussions for further state support.
“It’ll take us between four to five years to break even or make a small profit, so when we announce our results, we will tell the market that we made a loss again,” Kalawe said.
The airline is seeking to upgrade the engines of its aging Airbus SAS A340 wide-body fleet as part of a plan to lower fuel costs. The company wants about 30 new aircraft yet can only afford to lease rather than buy the planes, Kalawe said.
“Because the balance sheet is weak, we have no option but to lease the planes,” he said. SAA is evaluating “tenders and of course the delivery of the planes is going to take place over a 10 to 15 year period.”
SAA is shifting its focus to expand in faster-growing African economies after canceling its unprofitable route to Buenos Aires and putting its Beijing flights under review.
One option “is to look at setting up a hub in West Africa,” Kalawe said. “That hub will allow us to connect southern Africa to West Africa and to the West. That’s really where our strategy is looking at.”
culled from Businessday