Govt losing patience with SAA

Johannesburg - South African Airways (SAA) chief executive Khaya Ngqula conceded on Tuesday morning that the SA government was losing patience with its loss-making airline.

Ngqula made the revelation at a media briefing on the company's restructuring at SAA's headquarters in Johannesburg.

"The government told us it is not happy with our performance and that we need to restructure," said Ngqula who was answering questions on a possible government bailout for the loss-making parastatal.

"They are running out of patience and have publicly asked us to be profitable and turn around (the business)."

Ngqula said the government, as the sole shareholder, knows its responsibilities and has indicated that there will be "stringent conditions to further funding".

Chief financial officer Gareth Griffiths also agreed with Ngqula and said it was "unfortunate that we have not met (our) targets".

Griffiths said the "stringent conditions" meant the company had to develop a solid business plan for a turn around and set itself realistic targets. He said if the company didn't meet the targets after the restructuring "we'll be held accountable".

'Comprehensive restructuring process'

SAA has received shareholder approval for a "comprehensive restructuring process that will include all levels of the organization".

The restructuring would seek to simplify, rightsize and incentivise the company and its employees. Louisa Mojela, chairperson of the Finance, Risk and Investment committee will also chair a subcommittee that has been tasked with developing a new business plan.

Said Ngqula: "SAA has had several years of continued losses and needs a full scale restructuring to return to profitability. A profitable airline holds tremendous benefits for our customers, our staff and our country."

Over the next six weeks, SAA would present the business plan for shareholder approval and it was expected the restructuring process would take between 12 and 18 months to be implemented.

Ngqula said the restructuring would affect "everybody, one way or the other. Top down." He was responding to a question whether management would also take pay cuts as part of the cost-cutting exercise that would result in 1000 employees losing their jobs.

"The restructuring process is a painful and uncomfortable experience for all, however, it is a necessary process to keep the airline in operation," said Ngqula. He added that all SAA staff members were being involved in workshops to get their input.

"As a company we also don't encourage losing jobs, but in the circumstances of restructuring a business jobs would be lost," said CFO Gareth Griffiths. "We are very sympathetic to job losses but that (number of lost jobs) can be clarified after the business plan is completed."

'New mindset'

SAA has appointed airline restructuring specialists, Seabury, to assist and guide it through the restructuring process. Ngqula said major airline companies like Air Canada, Delta, Qantas, Continental Airlines, Iberia and US Airways have undergone a restructuring and were able to turn around by implementing various measures.

The measures included cost cutting and simplifying their businesses. Seabury had been involved in most of them.

However, Ngqula added: "Cost cutting is just one of the things we have to do. The main one is a fundamental restructuring. To simplify the business is what we have to do."

He said SAA would be broken up into different businesses, each with its own clear targets to meet. "When you split up the company you'll have clear targets and objectives for everybody."

He said essential requirements for a successful restructuring were to engender a "new mindset" which entails moving away from the current perceptions that government won't let the company fail.

By: Sikonathi Mantshantsha