South African Airways Needs $404 Million in Government Funds

(Bloomberg) -- South African Airways appealed to the government for 5 billion rand ($404 million) to cover immediate costs and warned that it may be unable to make debt repayments next year as the state carrier battles to stay in operation.

Chief Executive Officer Vuyani Jarana is at the early stage of a turnaround plan designed to return the carrier to break even by 2020 and ease dependency on the government, which last year approved a bailout to swerve a default on debt owed to Citigroup Inc. The airline has shaken up the board and cut routes to reduce costs but is yet to emerge from a state of financial stage.

“We need the money now,” Jarana told reporters in Cape Town Tuesday. He’d earlier told lawmakers that SAA would struggle to meet 9.2 billion rand in debt payments due March 2019, though he added that the government is in talks to find a private-equity partner for the airline.

South African Airways is one of the companies at the center of a probe by lawmakers into the mismanagement of funds at state-owned entities under the administration of former President Jacob Zuma.

The portfolio committee on public enterprises last month reiterated its intent to serve summons to former SAA Chairwoman Dudu Myeni, a Zuma associate who ran his charitable foundation. Under Myeni, the airline failed to properly value assets or correctly record irregular or wasteful expenditure, according to a report by the auditor general.

The carrier’s net loss widened more than threefold to 5.6 billion rand in the 2017 financial year. The airline suspended two executives including Chief Financial Officer Phumeza Nhantsi in March.

©2018 Bloomberg L.P.

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