Home News S.Africa’s SAA removes CEO amid Airbus controversy

S.Africa’s SAA removes CEO amid Airbus controversy

Published on 18/11/2015

South Africa's state-owned airline SAA removed Wednesday its acting chief executive as the troubled carrier wrestles with management turbulence and criticism from pilots while planning a controversial renegotiation of an Airbus deal.

SAA said in a statement that the head of the technical division, Musa Zwane, had been appointed as acting chief executive in place of Thuli Mpshe, who would return to her permanent role as general manager for human resources after holding the top job for just four months.

It is the seventh change of chief executive at the loss-making airline in just three years.

The reshuffle comes amid a push by SAA chairwoman Dudu Myeni to renegotiate a deal to lease five A330 aircraft from Airbus, a move which has raised concerns in the government and among SAA pilots because of its financial implications.

Deputy Finance Minister Mcebisi Jonas told a parliamentary committee on Wednesday that by law the final decision on any renegotiation was up to the minister, who would respond to SAA’s application “hopefully in a week”.

He said that any changes to the deal “should not compromise SAA’s financial position. In their application they have to prove that”.

Mcebisi said that the ministry had earlier “raised a whole lot of issues and concerns about whether the decision was a financially viable one and one would assume they are responding to those concerns”.

Writing in Business Day newspaper on Wednesday, SAA chairwoman Dudu said the airline had initially ordered 41 aircraft from Airbus in 2002, and that most of them had been delivered and paid for.

“In our current discussion, we have agreed with Airbus to swap delivery of 10 outstanding A320s for five A330s, which are more suitable for long-haul flights,” said Myeni.

But instead of leasing the aircraft from Airbus as agreed in an earlier renegotiation, SAA would prefer to lease them from a domestic company, she said.

– ‘Puzzling’ decision to renegotiate –

Business Day said Myeni’s insistence on yet another change was “puzzling” as the renegotiation in March had secured savings of R1.5bn ($105.5 million) for SAA, which would be lost under the new formula.

Myeni wrote in Business Day that “leasing directly from a South African company will ensure that SAA is not exposed to currency fluctuations, as the lease agreement will be rand-denominated.

“As most of the airline’s revenue is in rand, SAA always needs to manage its foreign currency exposure,” she wrote.

The rand has dropped by 20 percent against the US dollar since January this year.

Myeni said SAA had received proposals from financial institutions and banks in South Africa, which would “facilitate the full payment of the purchase price of the five A330 aircraft”.

Twin-aisle A330 aircraft cost between $229 and $254 million apiece depending on the version according to Airbus’s 2015 catalogue prices, although lower rates are often negotiated.

The state has poured millions of dollars into SAA over the last few years, as it limps from one financial crisis to another.

In January, the company received a 6.5 billion rand ($470 million) loan guarantee from the government to help stabilise its operational affairs.

Zwane, the new acting chief executive, made it clear at the committee meeting that there is widespread dissatisfaction within the airline, saying that apart from the pilots, cabin crew and technical staff had their own concerns, including “racism and discrimination”.

SAA pilots on Monday adopted a motion of no confidence in Myeni and the non-executive members of the SAA board, citing financial problems and the Airbus deal among other complaints.

On Tuesday, the airline’s chief financial officer resigned.

Opposition parties have called for Myeni’s resignation also, blaming her for failing to stem the carrier’s financial woes.

The company has over the last 10 years embarked on a major expansion of its global networks, including some less profitable African and Asian markets.