SAA turns surprise profit after billions in bailouts
South Africa’s state-owned airline, South African Airways (SAA), reported a profit for the year to 31 March 2023 and is no longer technically insolvent.
This is according to the National Treasury, which briefed the Parliamentary Standing Committee on Appropriations about its preliminary spending outcomes for the end of the fourth quarter of the 2022/23 financial year.
The Treasury’s presentation included a breakdown of the financial health of various state-owned enterprises (SOEs), including Eskom, the Post Office, and SAA.
Treasury said that SAA turned a profit of R500 million for the year ended March 2023 versus a budgeted loss of R740 million.
This profit comprised mainly of consolidation entries which totalled R505 million. SAA itself only turned a profit of R31 million.
Air Chefs lost R12.6 million, and domestic-only carrier Mango posted a loss of R66 million. SAA Technical turned the largest profit with R84.4 million.
SAA is also no longer technically insolvent, with its assets greater than its liabilities.
Treasury says that the airline has a net equity value of R670 million as of the end of March 2023.
Bailouts and privatisation
South African Airways (SAA) received R50.7 billion in direct government funding from 2007 to 2022, of which R48.4 billion was received in the past ten years.
This was revealed in a presentation on state-owned company bailouts and government guarantees to the Standing Committee on Public Accounts.
In its presentation, National Treasury revealed that the total direct recapitalisation amount for SAA from 2007 until the airline was placed into business rescue in December 2019 was R22.8 billion.
However, even more was spent on the struggling state-owned airline since the business rescue process was announced.
An additional R16.4 billion was allocated over the 2020 Medium Term Expenditure Framework (MTEF) period to repay government-guaranteed debt.
R10.5 billion was also made available to SAA in 2020/21 to implement the business rescue plan following the 2020 Medium Term Budget Policy Statement (MTBPS).
The Minister of Finance announced an additional allocation of R1 billion in the February 2023 budget speech for SAA to settle outstanding business rescue process obligations.
Therefore, when the 2023 Appropriation Bill assents into law, SAA will have received R50.7 billion in direct government funding from 2007 to 2022.
Despite the billions in bailouts, the SAA did not succeed in becoming a sustainable airline and wasted taxpayers’ money.
To save the airline, the Department of Public Enterprises negotiated a deal with the Takatso Consortium to acquire 51% of SAA.
The Competition Commission has recently granted conditional approval for Takatso Aviation to buy a 51% shareholding in South African Airways.
With this conditional approval, the transaction has now been referred to the Competition Tribunal for its consideration and final adjudication.
If the Tribunal approves the merger, the remaining 49% shareholding in SAA will be retained by the DPE as the shareholder representative of the government.
