Hot on the heels of the drug smuggling scandal that has rocked SA Airways, the national carrier has revealed it is drowning in debt and desperately needs more taxpayers' money to survive.The airline's chief financial officer, Kaushik Patel, told shocked MPs on Parliament's public enterprises portfolio committee on Wednesday that the airline had been severely battered by high oil prices and other factors forcing it to survive entirely on borrowing.
It has been a messy few weeks for SAA, hit by scandals involving chief executive Khaya Nqula, who has been put on ice while a probe into his alleged mismanagement takes place - and the sensational Heathrow drug busts resulting in the arrest of crews on two flights.
Patel told the portfolio committee on Wednesday that while the airline made an operational profit, this was wiped out not only by high oil prices but by the heavy interest it has to pay on its crippling debt.
"I'm sure if you run your business as normal you wouldn't want it to run it 110% on borrowed money. No business survives in the long term if it' s all the time on borrowed money. It has to have a certain amount of capital," he said.
The airline has suffered a loss of about R1-billion this year after losing more than R800-million in the previous financial year.
Patel cited alleged reckless hedging against the rand by the previous management of the airline - about four years ago - for the current financial mess.
But while SAA pleaded for more money, the government - its biggest shareholder - warned that it could not keep depending on taxpayers' money for survival.
Dr Andrew Shaw, deputy director-general for transport at the Department of Public Enterprises, said that while the government acknowledged that SAA was heavily in debt and needed to be assisted, it also believed that the airline needed to start showing a profit soon.
"SAA needs to trade itself into profitability," he said.
SAA had asked for a R5,6-billion rescue package from the government, but was allocated only R1,6bn by Finance Minister Trevor Manuel in his recent Budget.
This step was heavily criticised by opposition parties, which lamented what they said was poor management at the airline.
Shaw said the government had given the funds to assist with SAA's restructuring, which includes the grounding of its Boeing 747 fleet and a drastic reduction in staff.
Head of restructuring at SAA Vera Kriel said that the cost-cutting programme had saved about R2.3bn in all divisions of the airline, way above the R1.7bn target set for December.
Meanwhile the Cabinet on Wednesday told Safety and Security Minister Nathi Mthethwa to move with "absolute urgency" in beefing up security controls at the country's airports to prevent further drug-smuggling on SAA flights.
On Monday, British authorities detained the crew of an SAA flight after discovering 2.5kg of cocaine stashed in luggage carried aboard via the crew bus.
This followed the arrest of an SAA crew in January after UK customs officials found a big stash of cocaine and 50kg of dagga in crew luggage.
Government spokesperson Themba Maseko told journalists on Wednesday that the arrests were causing "untold damage to the reputation of the national airline, the country and its people".
The Cabinet has called on SAA crew "not to allow themselves to be used by criminal syndicates" and urged them to co-operate with authorities in blowing the whistle on anyone, "including their colleagues, who is involved in illegal activities".
National Airline Needs Big Govt Bail-Out - Business Day
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