British industry veteran Peter Davies said to have agreed to help try to return SAA to profit
South African Airways said to bring in expert to spur recovery
South African Airways (SAA) has agreed to hire a restructuring expert to help turn around the state-owned airline and help meet conditions laid down by lenders to roll over debt, according to two people familiar with the matter.
The incoming chief executive Vuyani Jarana met with the British industry veteran Peter Davies last month and he agreed to help try to return SAA to profit, said the people, who asked not to be identified. Mr Davies is a former CEO of European airlines including Air Malta and Brussels Airlines and currently runs London-based consultancy Airline Management Group.
“We are finalising steps that will lead to the appointment of a chief restructuring officer,” said the SAA spokesman Thali Thali. “No announcement on the identity of the candidate can be made before we attend and resolve the outstanding issues.”
Mr Davies didn not immediately respond to requestsl seeking comment.
The appointment of a strong management team is one of several conditions lenders have laid down to extend talks on loan repayments beyond the South African finance minister Malusi Gigaba’s mid-term budget update in October, the people said. One of those was a payment of 700 million rand (Dh189.1m) to Citigroup as part of 1.8 billion rand of debt due to the US bank by the at the end of September, which was released by the National Treasury along with funds for working capital on Friday.
Treasury confirmed the payment of 700m rand to CitiGroup and directed further questions to SAA.
A group of South African lenders led by Nedbank - including FirstRand, Standard Bank, Barclays Africa, and Investec - are prepared to negotiate a refinancing of debt through March 2019, the people said. In his mid-term budget update, Mr Gigaba is expected to announce proposals intended to make SAA break even by about that date, including details of a recapitalisation plan, they said.
Nedbank, which is leading the talks, does not provide details of its banking relationships with its clients, a spokesperson said.
SAA is one of several South African state-owned companies in need of urgent funding and government has said it needs a fresh management approach to stay in operation. The carrier has not made a profit since 2011 and has been surviving off debt backed by state guarantees, while Mr Jarana will become the company’s first permanent CEO since 2015 when he joins from wireless carrier Vodacom on November 1. The Treasury has considered trying to sell part or all of its 12bn rand stake in phone company Telkom to help finance a bailout.
SAA said last week it would reduce flights to South African cities of Port Elizabeth and East London as part of its turnaround plan. The carrier will also scale back routes to Luanda, the capital of Angola, and Kinshasa in the Democratic Republic of Congo.
SAA is also working towards repatriating as much as $1bn from Angola, Zimbabwe and Nigeria to help strengthen the balance sheet, according to two of the people. Money is trapped in those countries after exports collapsed leading to a shortage of hard currency.
Mr Jarana brings private sector experience from his time at Vodacom and Mr Davies has been identified due to his aviation expertise, one of the people said.
Mr Davies took over Air Malta when it was making an annual loss of $82m and made the airline profitable, according to his LinkedIn page. He also started Caribbean Airlines in Trinidad and Tobago and made that carrier profitable as well.