SAA 'is on verge of bankruptcy'

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  • capetonianm

    Not sure if GRJ can handle a jet that size though with just a 6,500′ runway?

    SA Airlink managed to run a small Embraer RJ off the end of the runway a few years ago. Not exactly confidence inspiring.


    They’ve also got a couple of AVRO jets. As for the 330/340I guess Mango could use it on the CPT – JNB route in summer when there is a very big demand. Also seasonal is the JNB – George route, used by many tourists and always full in summer. Not sure if GRJ can handle a jet that size though with just a 6,500′ runway?

    Probably get it in ok, but getting out may be a different matter.


    Why not Bill ZUMA I am sure he has that amount in the bank


    VS are about to double their JNB – LHR frequencies. To put it mildly, SAA will struggle even more on that route.

    I’ll refrain from further comment.



    Virgin Atlantic have added a 2nd daily flight to JNB, and i am sure that AF and KLM will also gain indirect flights ex UK for CPT also.
    Sadly with the envrionmental impacts in CPT at the moment, demand on that route may well drop at this time due to water restrictions in CPT, and it is affecting tourism bookings.
    Etihad have made such huge losses, Air Berlin, Alitalia, very foolish decisions, and are in a massive decline themselves, and i doubt their long term survival.

    Always sad to see a demise of a long standing National Airline.
    I brought family down to CPT to stay with me when there a month once, on EK. However, the flight to DXB then another long flight down made it very uncomfortable and added at least 9 hours, so for ME Carriers, that is not a good option. Perhaps Kenya Airlines will benefit, but with many troubles in some countries, this is off putting for many travellers these days.

    But will other Airlines be able to fulfill the absence of the domestic, regional, as well as Intercontinental flights of SAA?
    Qantas are adding flights ex Australia into ZA also now, so it seems by sector, that others are taking the routes, widespread amongst many Airlines.
    Ex Europe, i have always found ZA flights to be very expensive mile for mile compared to other Worldwide routes with more carriers / comeptition, being far less in all classes, per trip.


    The auditor-general, Kimi Makwetu, recently released his audit opinions on the financial statements of South African Airways (SAA) and Mango for the year ended March 31 2017, which suggest delinquent conduct on the part of the directors and provide further evidence to support the Independent Regulatory Board for Auditors’ (Irba’s) proposals for auditor rotation.

    Makwetu’s qualified audit opinions warrant closer analysis, especially when juxtaposed with the consistently “clean” audit opinions supplied by large international audit firms for these state-owned enterprises.

    It must be asked whether the auditor-general and his team possess unique talents that allow them to unearth financial misadventures the audit firms have consistently missed. Or is it just a coincidence that the SAA group went rogue in the first year in which Makwetu was responsible for the audits?

    Truth be told, the track record of mismanagement at SAA confirms that the likelihood of the airline only “going bad” in the past 12 months shares the same probability as Donald Trump committing to retain top staff for longer than a year.

    While the media have reported on the massive losses incurred by SAA for the 2017 financial year, insufficient attention has been paid to the detail of Makwetu’s audit opinions, which portend what is to come, especially with regard to throwing more good money after bad.

    In his preamble to the tabling of his audit opinions, Makwetu was at pains to explain the importance of adhering to sections 55 and 65 of the Public Finance Management Act.

    These require that the accounting authority (the board) submit financial statements for auditing within two months of the year-end and that within five months the accounting authority must submit the annual report, audited statements and audit report to the relevant executive authority responsible for the entity, and table them in Parliament within one month.

    Makwetu confirms that the accounting authority for SAA only submitted its statements for auditing on October 31 2017, in breach of section 51, and that he completed the audit on December 8 2017. He adds that since the executive authority did not table the relevant reports before Parliament, he was obliged to publish his audit report for Mango and SAA in terms of the Public Audit Act notwithstanding the absence of financial statements and the annual report.

    Even when faced with shambolic sets of accounts, the audit profession, for reasons best known to itself, adopts a walking-on-eggshells diplomacy, and in certain aspects Makwetu stayed true to his vocation. But it is in the detail of his audit opinions that he provides concise insight to the disgraceful state of affairs at SAA.

    His audit opinion for the unreleased SAA financial statements for 2017 is qualified under a number of subheadings:

    Property, aircraft and equipment. Makwetu records that SAA did not adequately review the useful lives and residual values of these assets and some were not even recorded. He was unable to obtain sufficient evidence to assess impairments and was unable to determine the correct net carrying value of these assets. In other words, a material R4bn balance sheet line item cannot be verified owing to financial maladministration.

    Inventory. With respect to spares and parts, Makwetu was unable to obtain reasonable audit assurance that inventory at SAA Technical was fairly valued owing to the fact that the assumptions applied in calculating net realisable value could not be supported by appropriate audit evidence. This meant an almost R1bn balance sheet line item could not be verified.

    Maintenance costs. SAA was unable to recognise maintenance costs in accordance with global accounting standards, and these were also recognised in wrong accounting periods and/or using incorrect exchange rates. Maintenance and trade payables were understated by more than R500m.

    Irregular, fruitless and wasteful expenditure. The auditor-general concluded that SAA did not establish adequate controls to maintain records of irregular expenditure and that he was unable to establish what these amounts should be in rand terms, a breach of the Public Finance Management Act.

    Makwetu said the directors also failed to ensure assets were properly managed and safeguarded and failed to ensure that all goods and services were procured in a manner that was fair, transparent and competitive.

    Equally troubling is his concern with respect to “internal control deficiencies”, where he confirmed a decline in the internal control environment, lack of action to mitigate emerging risks, failure of leadership to tackle nonperformance, failure to handle audit findings timeously and to ensure human resources were sufficiently skilled and that individuals were accountable for nonperformance, and a lack of governance in information technology.

    Regarding financial and performance management, Makwetu found SAA did not implement proper record-keeping in a timeous manner to ensure that complete and accurate information was accessible and regular reconciliations were not conducted. Effective financial systems of internal controls had not been implemented to ensure accurate financial statement preparation, and the review of the statements was not adequately planned.

    The above snapshot of the dysfunction at SAA serves to highlight not only a delinquent board, but also the futility of bailing out an organisation that has no internal or financial controls.

    Makwetu’s findings ask serious questions of the performance of the external auditors in previous years, when SAA received clean audit opinions.

    In conclusion, one must ask whether an executive team and board incapable of managing and overseeing elementary financial accounting principles can be entrusted with the overall responsibility of vital aircraft maintenance and safety. Is it not a matter of time before there is a catastrophic incident, the cause of which is not pilot error?


    That was a long missive Capetonian but very interesting and pretty much sums up the picture. My son arrives Monday, but rather than put him on the more convenient Mango flight at midday, I booked him on the Kulula flight about 2 hours later. Better safe than sorry!


    The South African government has announced another R5billion injection into SAA “to keep it in business until Oct, or Nov”. A total disgrace with 90% of the population in abject poverty. I bet they are so pleased that their corrupt politicians can travel in style……


    Dear old Cyril actually flew SAFAIR a short while ago, saying it would be wrong to spend so much on a private government jet when there is a much cheaper alternative.
    Probably a bit of a publicity stunt as he’s not done it since!


    A total disgrace with 90% of the population in abject poverty. I bet they are so pleased that their corrupt politicians can travel in style……

    Sadly, that’s what it’s about. Not just letting the politicians travel free, but giving their friends and families jobs which they are utterly incompetent, unqualified, and inexperienced to do.


    The elephant in the room is the question of funding. In my view it is going to continue to be the taxpayer.

    New South African Airways chief executive Vuyani Jarana is in no doubt of the size of the task he has inherited and is wasting no time to tackle its challenges.

    “The biggest single issue for SAA is it has been a loss-making airline for decades, so we have to restructure the business, rebase it, make sure it can come back and be profitable,” he explains. “So we have put together a very solid and ambitious plan to make sure the business breaks even in three years time. Now obviously the big part is around making sure we have funding to support the turnaround plan and this is what we are talking to the shareholders.”

    Former telecoms executive Jarana took the helm in November and is working with a management team including former Brussels Airlines and Air Malta boss Peter Davies as chief restructuring officer.

    “The costs are too high and we must take out the cost, but in a number of areas, whether it is in supply chain, how we buy things, business simplification, but also pure areas around headcount,” he says. “We have to rightsize the business.

    “Looking at the fleet and network, we are probably quite thin for the size of the business we are running,” he adds. “The immediate issue is we have an older part of the fleet, we have to make decisions quite quickly, especially given the oil price movement now, so we are working very hard in terms of re-tuning the network.

    “By September we should be able to present to the board a new growth path for SAA with associated fleet requirements, and then we have to find the right commercial construct within which we can refresh the fleet without putting too much burden on the P&L.”


    It interesting to see the difference between Ethiopian Airlines and South African Airways over the past 10 years.

    Tom Otley

    Yes, it made $232 million last year and the government is looking to sell it

    Ethiopia signals intent to open economy with sale of prized assets
    Ruling coalition abandons roots to sell stakes in Ethiopian Airlines and Ethio Telecom

    Though as one of the comments on that FT piece points out, the price will likely be so high that the only bidders will be Chinese airlines, or Middle East ones…

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