LONDON – South African Airways (SAA) has announced that its CEO, Vuyani Jarana, has stepped down due to lack of funding and a drop in government support for the turnaround plan of the ill-fated carrier.
Jarana’s tenure lasted only 18 months, offering strong promises to bring the carrier round to its first profits since 2011. He, like the SAA chairman Johannes Bheukmuzi Magwaza, has lambasted the government for the continued failures faced by the airline.
In a letter seen by Bloomberg, he said that “Lack of commitment to fund SAA is systematically undermining the implementation of the strategy, making it increasingly difficult to succeed”.
It is understood that the finance minister of South Africa, Tito Mboweni, is very reluctant to approve further outlays and actually wants to shut the airline down instead.
Back in October, the carrier received a $342 million bailout to help repay any outstanding loans, but the government has not committed any further, putting the airline, once again, into disrepute.
This decision by the government has made any further investments from lenders outside of the country even more challenging, but the airline did confirm it was in talks with the Bank of China and African Export-Import Bank about a potential cash injection.
This long stint without profits has also been caused by mismanagement and corruption scandals. In the last six to seven years, it has resulted in losses of $428 million across the board.
In 2018, Jarana estimated that around $957 million of funding would be needed to fund the airline until it becomes profitable. The airline has only received half of that amount so far.
Even then, another $743 million would have been needed to fund debt that is due to mature this year and escalate further.
The airline requires additional investment, not just to pay off the debts, but to become more efficient in its operations.
Jarana has had to do the hard work during his tenure to secure some funding at least. Last year, he announced that there would be plans to cut between 1,000 and 1,500 employees, including around 300 flight attendants.
The carrier has also had to deal with the aging Airbus A340s and A319s it has in its fleet. It has seven A340-300s, at an average age of 15.4 years old, as well as nine A340-600s with an average of 15.6.
On top of this, the short-haul fleet is aging as well. Its seven Airbus A319-100s are reaching up to 14.4 years old on average.
Whoever becomes the new CEO will have to get the government on the side for additional funding. It remains clear that the airline is in a very dire position.
Turning around SAA will be a hard task so long as the current administration is in place.