South African Airways in crisis as head resigns

September 28, 2012
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South African Airways has for a long time been operating at a lossAFP-File
JOHANNESBURG, Sep 28 – Embattled state-backed carrier South African Airways was thrown deeper into crisis on Friday after its chairwoman and seven board members resigned in an apparent spat with the government.

Cheryl Carolus announced her resignation through local media, leaving the government – the airline’s sole shareholder – stunned that it had not received formal notice of her decision.

Describing the move as “bizarre,” Malusi Gigaba, Minister of the Department of Public Enterprises, promptly appointed seven new board members and replaced Carolus.

The method of her departure may be a symbolic of how strained relations between Carolus and the government had become.

In an interview with state broadcaster SABC, Carolus described her position as untenable.

She complained that the “reputation and professional integrity” of board members had been “dragged through the mud without any shareholder clarification of support.”

Speaking to the Business Day newspaper she also said the “extraordinary” step came after “a lot of careful thought and consideration.”

“I believe in the airline, I believe it is a critical national asset at the southern tip of the hemisphere,” Carolus told the paper, adding: “It will always be an airline that is tough to run.”

South African Airways did not respond to multiple requests for comment.

According to government spokesman Mayihlome Tshwete, the appointment of the new members was meant to bring stability to the company.

The term of the 14-member board was due to come to an end at the upcoming annual general meeting scheduled for October 15.

“I have no doubt that they have the capacity to assist government in propelling the airline to greater heights,” Gigaba said of the new members.
Carolus took the helm of the already troubled state-owned company in 2009.

The carrier has a long history of turning to the Treasury for financial aid. Earlier this year the airline asked for a cash injection of up to six billion rand ($726 million).

A decision on whether to grant the money has not yet been taken.

The airline has for a long time been operating at a loss while its senior managers pocket high salaries.

In 2009 its former chief executive Khaya Ngqula was sacked following allegations of financial mismanagement, resulting in a drawn-out court battle.

The company’s profits have been hit by the rising cost of fuel and reduced passenger numbers, as the result of the global financial downturn.

In 2011 the carrier reported an unusual increase in profit from 442 million rand in 2010 to 782 million rand, boosted by the 2010 FIFA World Cup.

But the presentation of this year’s financial results has been delayed, signalling troubles at Africa’s leading airline.

Speculation is rife that the firm will report a massive loss this year.

As the airline continues to eat into the state coffers there have been calls from industry analysts and opposition parties for SAA to be privatised.

“The cost of the economic opportunities lost because of the money swallowed by SAA is simply staggering,” said Jasson Urbach, an economist at Free Market Foundation.

Carolus is the country’s former High Commissioner to the United Kingdom. She was replaced by Vuyisile Kona, who had been an SAA executive.

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