Incoming CEO Jarana sees lenders as important as government
Management and board of SAA must be committed to turnaround
Johannesburg (Bloomberg) – The chief executive officer-elect of South African Airways is making it his first priority to convince banks that the state-owned carrier’s new leadership is committed to stemming five straight years of losses and repaying its debt.
Lenders and other stakeholders need to be assured that “there is a plan that is plausible for SAA,” Vuyani Jarana said in an interview in Johannesburg. “It’s a public-interest company, you have your lenders who are as important as your shareholder.”
Jarana, 46, is due to become SAA’s first permanent CEO since 2015 when he joins the airline from Vodacom Group Ltd., South Africa’s largest wireless carrier, where he previously held the position of CEO of its business division. His appointment comes after Citigroup Inc. and Standard Chartered Plc both refused to extend loan terms for SAA, which hasn’t made a profit since 2011 and has been surviving off government bailouts and guarantees.
“There is a strategy in place to stop the bleeding and I am confident that it will succeed, and that we can negotiate plans for refinancing,” said Jarana. “The exciting part will be in re-engineering the commercial and growth strategy and improving customer satisfaction at SAA.”
SAA has been run on an acting basis by Chief Technical Officer Musa Zwane, who was the seventh permanent or temporary CEO of the airline since 2010. Chairwoman Duduzile Myeni, a former schoolteacher who also heads President Jacob Zuma’s charitable foundation, has been on the airline’s board since 2009 and acted as the board’s chair until her permanent appointment in 2015. Her contract was renewed for a year in September 2016.
“It is time for a new person in that position,” Finance Minister Malusi Gigaba said earlier this month. The airline needs a recapitalization of at least 10 billion rand ($768 million) and there are plans to strengthen the board, he said. It is in talks with lenders about 6.9 billion rand of loans coming due by the end of next month. The government is considering options about reducing its 39 percent stake in Telkom SA SOC Ltd., the country’s largest fixed-line operator said on Wednesday, which could be used to fund SAA.
The airline hasn’t started preparing its annual financial statements because it is waiting for the capital injection from the government, Johannesburg-based Business Day reported on Friday, without saying where it got the information. Myeni, whose term ended on Aug. 31, will serve until the next annual general meeting, the newspaper said, adding that SAA has asked the finance ministry to postpone the AGM to January.
Jarana, who still needs to serve out his notice period at Vodacom, the terms of which haven’t been disclosed, said he will ensure he surrounds himself with the right people to turn around the debt-laden airline. “I would want to see more people with airline and international experience joining me at SAA,” he said.
“There will be no miracles at SAA,” Jarana said. “You need management and a board that is committed to transform the airline and return it to profitability.”