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Five reasons why SAA is experiencing turbulence

The South African Airways (SAA) chairperson Dudu Myeni faced a grilling at a joint sitting of the finance and public enterprise committee in Parliament on Wednesday.

Here are five points from the meeting that you should know:

1. Visa regulations impact on SAA
Children flying into SA dropped by 41% after the visa regulations were introduced. Only 29 000 children flew into SA between June and September 2015 compared with 50 000 in the same months in 2014. This cost the airline R550m. SAA said the visa change was one of the reasons for the drop.

2. SAA wants further R4bn-R5bn bailout
Depending on whether it makes a saving on its A320-A330 swap, which will bring about a R1-billion saving, SAA will request this amount to stay a going concern. The Democratic Alliance said this request is ludicrous given the financial constraints SA is currently facing. The state-owned company made a loss of R648-million in the first six months of the 2015 financial year and this request will be in addition to the R6.5billion guarantee it received in 2014.

3. SAA seeks to up stake for black entrepreneurs
SAA said it will increase its procurement for black entrepreneurs by 30%. There are currently only 29 businesses that are 50% black-owned, said Myeni. “We want to see that number grow.” SAA spends R24-billionn procuring goods and services, but previously disadvantaged communities only see 4% of that, she said.  

4. Airbus deal standing in the way of annual report
The SAA said the A320-A330 Airbus swap was holding up the signing off of the financial statements needed to wrap up the company’s annual report. Holding it up was a board level investigation checking whether the change in the structure of the transaction would not compromise SAA and leave it in worse position, as well as examining the risks of other consequences of moving away from the contract and how to mitigate those risks.

SAA sent Treasury the report on November 16 and Finance Minister Nhlanhla Nene is expected to respond next week. If he approves the deal, then the financial report can be concluded, Treasury’s Deputy Minister Mcebisi Jonas explained. Yakhe Kwinana, chair of SAA’s audit committee, said they had to wait for this matter to be concluded in order to ensure SAA was a going concern.

5. Suspend Myeni and dump the board, says DA and EFF
The Democratic Alliance and the Economic Freedom Fighters called for the removal of the board and its chairperson.

“Myeni seems resolute on destroying this entity,” said DA MP Natasha Mazzone. “She has lost all support, evidenced by the resounding vote of no confidence in her by SAA pilots. There can be no more excuses.”

EFF MP Floyd Shivambu called for the whole board to be removed. “Get rid of these people and expedite the process of electing a new board,” he said. “The SAA board must fall.” –  Fin24

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