Intellidex head of capital markets research Peter Montalto says the fact that two CEOs have resigned from state-owned enterprises within weeks of each other raises serious questions about the board's composition and power.
Group CEO Vuyani Jarana resigned over the weekend stating that he was unable to turn around the national airline due to inconsistency in state funding.
In his resignation letter, Jarana explains that SAA needs close to R22bn to break even by 2021.
Eskom CEO Phakamani Hadebe also announced his resignation due to health reasons.
Montalto says keeping SAA is going to be a political choice as it is clear that the State will have to step in to bail out the airline.
The argument for keeping it is from a political point of view, in a developmental stage, you need organisations like this who can facilitate developmental mandates like providing employment and skills.— Peter Montalto, Head of capital markets research - Intellidex
There is also an argument of security of transport in and out of the country.— Peter Montalto, Head of capital markets research - Intellidex
In the end, it is going to be a political choice because the money is theoretically available to bail it out from the State. It can be sustained indefinitely as a loss-making organisation but ultimately someone has to pay, it's either going to be the customers or the taxpayers.— Peter Montalto, Head of capital markets research - Intellidex
Montalto gives an assessment of where SAA got it wrong in comparison to other airlines that are performing well like Ethiopian airlines.
Basically, the other airlines have the ability to do regional connections in a much bigger way than South Africa does, given the country's geographic position.— Peter Montalto, Head of capital markets research - Intellidex
To hear the rest of the conversation, listen below:
This article first appeared on 702 : Jarana's resignation raises concerns about SAA board's powers - researcher