The airline’s acting CEO told MPs it had sold three aircraft to a Lesotho company and is leasing them instead
Struggling airline South African Express (SAX) sold two aircraft to a Lesotho-based company and leased the same aircraft at a cost of millions, MPs on the standing committee on public accounts heard on Wednesday.
Public Enterprises Minister Lynne Brown and the airline’s management appeared before the committee to respond to concerns, including its dismal finances and high levels of irregular expenditure.
The auditor-general raised the flag about irregular expenditure at the airline in his 2015-16 report.
MPs heard that former CEO Inati Ntshanga was paid more than R700,000 when he left abruptly at the end of March.
Chief financial officer Mark Shelley told Scopa on Wednesday that Ntshanga was paid out the balance of his contract.
“The CEO left because we decided not to renew his contract and to end it early. He was paid the remainder of his contract which is five months. We moved as a board and consulted our shareholder on the matter,” said Shelly.
SAX is due to table its financial statements on Thursday and CEO Victor Xaba, who was part of the delegation in Parliament, told Business Day in written responses that the airline was on track to meet this deadline.
“The airline’s financial statements are due on August 31 2017 and have therefore not been delayed,” he said. “We are in the process of finalising the inventory reconciliation as well as finalising taxation, which can only be concluded once the audit is complete,” said Xaba.
Like South African Airways (SAA), SAX has incurred big losses in the past few years and knocked on the government’s door for a guarantee to retain its going-concern status and tackle its liquidity problems.
It is also the subject of a liquidation application brought against it by a supplier for the nonpayment of leased aircraft.
Last Friday, the airline submitted a notice of its intention to oppose the liquidation application and filed an answering affidavit, Xaba said.
“South African Express has settled the undisputed portion of the claim raised by Solenta,” he said. “The difference remains a case of contractual dispute, which ought to be resolved through processes other than a liquidation application.”
Asked how much it owed creditors, Xaba told Business Day: “This information will be made available upon the publication of the airline’s annual financial statements.”
In Parliament, Brown shot down suggestions that the airline would be privatised and instead said talks of merging SAX, SAA and Mango were gaining traction.
“In 2015-16, austerity measures were implemented. SA Express’s challenge is that it is a feeder airline to SAA,” she said.
“We lease airplanes. They have to recapitalise their aircraft and their purchasing. The AG [auditor-general] even says [in the 2015-16 report] that the shareholder must step in to recapitalise SA Express.”
In terms of the merger talks, she said the routes of each of the carriers must create competition and allow them to go where people needed to go. To this end, her department would discuss an optimal corporate structure with the Treasury.
“SA Express goes where others won’t go. But as soon as they do go, others come. Then you have to compete with newcomers. New operators push down the cost. Because of old aircraft and leasing arrangements it has caused numerous problems.
“The way the airlines are structured, the business model does not make sense. That goes for all three of them.
“There is one codeshare which sits with SAA but should go to all three airlines who share the same routes,” she said.
ANC MP Nthabiseng Khunou questioned Xaba about the airline’s leasing arrangements.
Xaba said SAX had 21 aircraft at its disposal, three of which it owned and the rest were dry-leased from suppliers. “We previously owned six. We sold two and scrapped one, which had lived out its lifespan. The two were sold to a company called Matekane and the amount they were sold for can be provided later,” said Xaba.
Khunou asked Xaba if SAX was leasing the aircraft it had sold to Matekane, to which Xaba responded in the affirmative.
When Khunou asked how much SAX was paying to lease the aircraft, Xaba replied that it cost up to R1.7m for each aircraft a month.