JOHANNESBURG State-owned South African Airways
[SAA.UL] announced on Monday it was embarking on a
restructuring plan in a bid to return to profitability within
SAA said the move, which involves spinning off non-flight
operations into seven subsidiaries, was expected to result in a
2.7 billion rand ($378.2 million) turnaround over the next 12
to 18 months.
"In the face of a high cost base created by, among other
things, uncompetitive ownership and aircraft lease costs,
excessive head count and fuel price volatility, SAA must
overhaul its entire business if it wants to survive," SAA Chief
Executive Khaya Ngqula said in a statement.
SAA said it may seek outside equity partners for some of
its unbundled units and that Air Chefs, the airline's catering
supplier, and Galileo, the platform for the travel industry,
would be sold outright.
"In principle, SAA needs to focus on its core businesses,
and our core business is the movement of people and goods by
air. Going forward we will focus on our strengths and explore
the myriad opportunities for growth especially in the African
market," Ngqula said.
The airline said the proposed timeline for completion of
the plan was December 2008.
South Africa's public enterprises minister said in January
an initial public offering of SAA could be years away and that
the government had no plans to bail out the struggling airline.
The airliner said part of its fleet -- one owned and five
leased B747-400 aircraft which are expensive to operate --
would be grounded.
SAA also announced that it would close the Paris route,
which has been losing money, in October.
SAA posted a 90 percent fall in profit last year as fuel
costs rocketed and said it would consider selling shares only
when it had reduced its debts.
At the end of March last year, long-term liabilities
amounted to 4.6 billion rand, while capital and reserves were
1.179 billion rand.