The airline would not need a bail-out of the type contemplated for its larger sibling South African Airways (SAA), SAX's chief executive Inathi Ntshanga said recently.
Last year, Public Enterprises Minister Malusi Gigaba asked the Auditor-General to take over the audit at SAX after a battle between the airline and its auditors revealed that the carrier's accounts were in shambles.
"We are busy with the clean up. We have broken the back of the source of all the errors now," Ntshanga told Business Day.
He expected the financial statements for the 2011-12 year to be tabled in Parliament by July. Ntshanga said in the past year, SAX had been able to cut R126m of its costs.
Earlier this month, Parliament heard from the airline's chairman, Andile Mabizela, that the airline needed a Treasury guarantee of at least R1.1bn. The need for a guarantee arose after the Auditor-General restated the accounts.
The restatement covered three financial years and revealed that equity on the balance sheet had been eroded from R1.1bn to R463m - to the extent that SAX no longer complied with the lease agreements on aircraft and had breached loan covenants.
The airline, the Treasury and the Department of Public Enterprises had been in discussions with Rand Merchant Bank, First National Bank and Nedbank, the banks whose transactions with SAX were affected by the loss of equity from the carrier's balance sheet.
"An agreement was reached that a lower level of equity would give the banks comfort," Ntshanga said. "This eliminated the need for the R1bn guarantee initially requested," he added.
SAX has instead negotiated a R539m guarantee. Of this, R123m will be used to support the aircraft leases, R316m to cover the loans and the remaining R100m will be used to cover working capital. Ntshanga said the R100m would be used as a guarantee for the airline to borrow against for working capital requirements such as expensive engine and landing gear overhauls.
"There is no need right now," said Ntshanga, referring to possible support for the airline from the state. "We are close to break-even despite the difficulties in the industry."
Gigaba's spokesman Mayihlome Tshwete said on Monday (20 May): "They are actually doing quite well financially, apart from the equity challenges the company is starting to look pretty good and they might even break even this year."
Referring to plans for the possible integration of the state's aviation assets, he said: "The integration is in the turnaround strategy (for SAA) and in the plan for SAX. (The plan) speaks to better co-ordination and a deep review of how these companies can function better together."
Source: Business Day via I-Net Bridge
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