South African Airways has asked the government, sorry, the taxpayer that doesn’t get a say, for a recapitalisation of about R6 billion to fund operational costs, growth strategy and a fleet renewal for the coming future. Why? Because it would post a loss this financial year if this doesn’t happen, and growth is important.

SAA’s financial woes just don’t seem to be getting any better. This is despite it posting a net profit of R782 million for the year to end-March 2011 and a R442 million profit the previous year.

Wolf Meyer, SAA’s chief financial officer, said in an interview yesterday that it was likely SAA “would probably be in a loss situation” for the 2011-12 financial year to end in March.

The Business Day reports that if the additional funds were approved, they would be in addition to:

The R1,3 billion subordinated loan SAA already has from the government, and the R1,6 billion “going concern” guarantee it [SAA] obtained to underpin its cash requirements after the auditor-general raised concern last year about its ability to generate sufficient cash to fund operations.

Wolf told Parliament’s public enterprises committee that:

This year we will have to go through the same process and the guarantee required will probably be higher.

SAA’s weak balance sheet is one of the main problems: all Meyer would say is that SAA’s debt to equity ratio was “high”. The redressing of the balance sheet would be necessary if it was to finance its future growth and fleet renewal.

While still a way off from approval, the funds needed would depend on the growth strategy adopted, and just how the money would be allocated was also still under discussion.

Soaring operating costs and a weak rand have had some of the blame thrown at them, and SAA chairwoman, Cheryl Carolus, was quick to reiterate to Parliament yesterday that the required R4 billion – R6 billion, had nothing to do with further mismanagement that had taken place at the airline.

Nor did it have anything to do with frivolous spending, or “going wild”, as she put it, but rather to continue SAA’s future growth.

Amongst the proposed purchases are 20 narrow-bodied Airbus A320’s for domestic routes, to take place between next year and 2017, as well as planning for the replacement of the wide-bodied international fleet for delivery from 2017-18.

Siza Mzimela, SAA’s CEO, said it was “sad” various factors “completely” wiped out the strong gains SAA had recently made.

It’s probably merely a matter of time before something is signed off though, because the Department of Public Enterprises’ deputy director-general responsible for transport, Raisibe Lepule, said yesterday it was “fully behind” SAA’s request.

[Source: BusinessDay]