If the oil price goes much higher it could threaten South African Airways’ (SAA) survival, chief executive Khaya Ngqula said on Friday.

“Once it is $55 and up, it becomes just a question of survival,” Ngqula told reporters in Johannesburg. “We are taking it one day at a time … but there is no cause for alarm just yet.”

The airline will have to manage its other fixed costs, as it cannot control the oil price, he said.

Brent crude reached a record peak of $56,15 per barrel on Thursday — the first time it has broken the $56 barrier.

In London, the price of Brent North Sea crude oil for delivery in May edged down six cents to $55 on Friday.

Ngqula said he is otherwise happy with SAA’s progress.

“We are an organisation fighting to regain our status, but planes are full, profits are up,” he said, warning that it could take from three to even 10 years before the airline comes right.

SAA was hit by a pre-tax loss of R8,7-billion last year after it hedged against the rand.

Minister of Public Enterprises Alex Erwin said he is confident about the airline’s future, especially in light of South Africa’s positive environment and the potential to grow its business in Africa.

Erwin said the government has achieved its first objective of stabilising the airline.

“Now we are seeing the financial improvements,” he said.

Erwin said the government is still not interested in selling off part of the airline.

“There is little point in bringing in a strategic equity partner [now] as we are trying and succeeding to build and strengthen SAA,” he said.

Such partners would have different views and objectives for the airline to those of the South African government, he said.

“This complicates issues just when we are trying to simplify.”

Erwin, however, suggested a partner might be a future possibility.

“I am not ruling it out forever and a day, but not in this time period. It does not make either commercial or economic sense at this moment.”

Ngqula said morale at the airline is up, despite the uncertainty created by the voluntary retrenchment packages offered to 602 managers.

He said reports that very few managers have taken up the offer of severance packages are missing the point.

Less than 20% of managers have reportedly applied for retrenchment.

“Our strategy is not only focused on voluntary severance packages … that is a minor part of our big vision,” he said.

He said SAA’s vision involves four areas: increasing revenue, focusing on Africa, cutting costs and changing the mindset of the organisation to one that is profit-oriented. — Sapa

Source: Daily Mail & Guardian
URL: http://www.mg.co.za/articlePage.aspx?articlei…/p>