South Africans Airways says it has secured the R3.5bn loan to keep operating until the end of the financial year in March, providing temporary relief for the cash-strapped airline.
The loss-making flag carrier, which is battling cash flow challenges, is implementing a three-year turnaround strategy and has said it needs a total of R21.7bn in loans over the same period.
SAA spokesperson Tlali Tlali stated on Tuesday that the R3.5bn, which has been secured from local lenders, was part of the R21.7bn funding requirement.
“The airline, working jointly with the shareholder was able to secure an undertaking from local lenders to make available the amount of R3.5bn to SAA,” said Tlali.
He said the funds would enable the airline to operate up to the end of the financial year in March. In October, the National Treasury allocated R5bn to SAA, as announced during the medium-term budget policy statement.
The funds were directed at debt repayment.
Tlali stated that there was no expectation that SAA was going to become profitable before 2021, stressing that plans were underway to steer the airline out of its financial quagmire.
“We are working towards the goal of becoming profitable by 2021, there is no plan of shifting the goal post,” he said.
In need of funds
SAA interim chief financial officer, Deon Fredericks, revealed in November 2018 that the national carrier needed to raise R3.5bn by March, as it battles operational and financial challenges.
Briefing the portfolio committee on public enterprises, Fredericks said the airline expects to incur losses of R5.2bn in the 2018-19 financial year and R1.9bn in the 2019-20 financial year, after reporting a net loss of R5.7bn in the 2017-18 financial year.
Plans to turn around the flag carrier included the implementation of capacity adjustment in the domestic market and network optimization in the regional and international markets.
Tlali said on Tuesday that some of the key loss-making routes included the Johannesburg to London link which had been “bleeding cash” due to stiff competition, but its performance had stabilized following remedial interventions adopted by the airline.
On the domestic front, the route between Johannesburg and Port Elizabeth was not performing well.
The airline’s Chief Executive Officer Vuyani Jarana, who was appointed in August 2017, and the new board, have been working to stabilize the financial situation of the company which has been battered by mismanagement and has been a recipient of numerous government-backed loans and guarantees.