South African Airways (SAA) has clarified its financial position, after a series of media reports that it was seeking more government bailouts.

The state-owned carrier, which has been in financial difficulties for several years, has said in the past it is technically insolvent and has survived through a series of financial government subventions. The government has also issued financial guarantees to persuade private sector lenders to continue to finance the airline.

The South African flag carrier reportedly has an uneconomic fleet and route network and has been plagued by reports of internal corruption in recent years.

SAA CEO Vuyani Jarana, who was brought in from the telecoms sector a year ago with a remit to restore the company to financial health, aims to reach breakeven in 2021 but cash infusions are required from the government to reach this point. Several recent financial bailouts have been used to pay off maturing debts and to provide the airline with working capital.

Following reports in the past week that further government funding is required, an SAA spokesman told ATW the turnaround plan agreed between company and government remains unchanged. SAA had agreed to a five-year recovery program, of which breakeven by 2021 was a major milestone.

“The airline has not been properly recapitalized for many years and this will be part of the implementation plan. In driving the execution of our strategy, we have begun to focus on profitable routes, right aircraft for the routes and markets we serve, as well as overall cost alignment, including the right skills and optimal capital structure. A full and effective execution of the strategy will be enabled, among other things, by a response to our funding requirements.”

As a result, the spokesman said, SAA had announced earlier this year that it had requested funding of ZAR21.7 billion ($1.56 billion) over three years. “We have not shifted any goal posts on this. We have received less than a quarter (R5 billion so far) of the amount we requested.”

He added: “That means, from the original request, we still expect R16.7 billion to become available over the remainder of the remaining implementation period. The money will be used to pay maturing debt and serve as working capital for the business. We, however, remain focused and encouraged by the results of our half-year performance, which confirm that we are in the right trajectory.”

Alan Dron