POSITION REPORT

JIM DAVIS SAYS YOU CAN JUDGE a landing by the way a student pilot takes off.

If the student doesn’t taxi on the centreline. If the ailerons move when he turns on the taxiway. If he takes power too quickly. If he doesn’t maintain the centreline on climb out. All of these are indicators that the final approach will be sloppy and probably unstable. And from that a bad landing will probably ensue.

On 23 September SAA took off for the first time in nearly 18 months. And the airline equivalent of Jim Davis’s warning signs are plain to see. It doesn’t have – at least to the best of my knowledge – a business plan that makes any sense. In fact, the current plan is so unrealistic it is best described as a flight of fancy. It doesn’t have a rational route network that feeds other routes or origin-destination pairs. It has the wrong fleet. If it gets into bed – as it must – with the Takatso consortium, it will have two management teams. The passenger experince will be bad – the aircraft have outdated inflight entertainment. The planes are obsolete, maintenance hungry, fuel guzzlers.

But perhaps most startlingly, it doesn’t have any fuel in its tanks to takeoff. In this metaphor, fuel is the capital required to get the airline to sustainable operations at cruising altitude. The Business Rescue Plan called for an initial working capital injection of R2.8 billion. But of this: R800 million was allocated for the payment of post-commencement creditors; provision was made for retrenchment costs of R2.2 billion, plus there was provision for un-flown tickets of R3 billion and payment to Other Creditors of R2.2 billion. That adds up to a negative R5.4 billion before they have even got going.

So SAA desperately needs the promised dowry of R3 billion from the Takatso consortium. Yet sensibly, Takatso are playing hard to get. SAA restarting operations means that it is fast heading towards a fiscal cliff and so will be increasingly desperate to finalise the agreement with Takatso – with progressively less power to negotiate. Takatso must be happy to wait it out.

In the first year of operations the airline expects to carry 270,000 passengers – yet make a R3.2 billion loss. So even if it goes according to this optimistic plan, then we must add another R3.2 billion to the R5.4 billion shortfall. Perhaps this is why the airline’s business plan provides for an unconscionable cash burn of R60 billion in the first five years of operations. And that’s without even thinking about a new fleet – which, if it has to be paid for upfront, may cost upwards of another R30 billion. And after all, which banks would be prepared to lease planes to SAA after being so badly burned in business rescue?

The South African government needs to be stopped by court order from throwing money it does not have at what is nothing more than yet another face-saving vanity project. j

October 2021 Guy Leitch