CAPE TOWN : The Auditor-General of South Africa raised serious concerns about South African Airways (SAA). The agency warned that SAA could close within the next 12 months if its problems are not resolved.
During a briefing to Parliament’s portfolio committee on transport, senior audit manager Thato Kunene said SAA faces “material uncertainties.” He warned that without urgent action on mounting financial and operational pressures, SAA may shut down.
Kunene also questioned SAA’s ability to operate successfully and make a profit. “When we say ‘material uncertainties,’ we mean that certain significant issues or doubts, if they happen, could force the entity to close within 12 months,” Kunene explained, according to Sunday World.
These concerns emerged just as the company reported a remarkable increase in revenue, R8.8 billion, up from R6.5 billion in the 2023/2024 financial year. However, operating costs rose even faster. As a result, SAA reported an operating loss of R472 million, compared to R250 million previously.
Minister of Transport Barbara Creecy also challenged SAA’s reported profit. She pointed out that the profit relied on selling assets, including Heathrow landing slots, rather than core operations. Creecy noted that although SAA increased passenger volumes and revenue, it still falls far short of profitability targets.
“In the financial year under review, SAA remained stable. The airline reported a moderate profit, but this came mainly from selling the Heathrow slot. While passenger numbers and revenue improved, we are still far from being a profitable entity, which is our goal,” Creecy said.
The struggling national airline has also received a staggering R1-billion cash injection from the government in the year under consideration, which, according to Kunene, has at least covered the long-term loans.
The report also flagged SAA for increased irregular, fruitless, and wasteful spending compared to the previous year. Irregular expenditure rose from R474 million to R504 million, and fruitless and wasteful expenditure doubled from R1 million to R2 million.
The report blamed these issues on a lack of consequence management. It also revealed that, although R100,000 was stolen, no case was opened or reported to the South African Police Service. Kunene said the airline does not generate enough cash to cover its operating costs. He warned that some financial reporting may paint a more favourable picture than the reality.
“There are geopolitical issues that are happening now that are likely to impact the liquidity pressures of SAA. As a result of the fuel price changes, forex, and also a disruption in terms of the supply. So, we request that ongoing monitoring of the growing concern of the entity needs to be closely done, as these key developments that are happening in Iran-US and Israeli strikes are impacting the key aspects of the business,” said Kunene.
Kunene Raises Concerns over SAAT
Kunene also raised concerns about SAA’s technical subsidiary, South African Airways Technical (SAAT). He described SAAT as operating in a high-risk control environment that urgently needs governance intervention.
“With SAAT, we cannot confirm its status as a going concern due to material uncertainties. The financial statement was so severe that we could not audit most items,” Kunene explained.
“Among the most serious concerns are billing inefficiencies that have resulted in revenue leakages. Invoices are often not processed on time due to poor coordination between operational and finance teams. Late submission of supporting documents has led to incomplete audit trails, disputes with customers and revenue reversals.”
He also flagged payments processed without adequate proof of delivery. This increases the risk of irregular expenditure. Poor integration between operational and financial departments remains an ongoing problem.
SAAT depends on SAA for survival, which creates a cycle of financial dependency and amplifies risk across the group.
In December 2019, SAA entered business rescue to avoid liquidation after severe cash flow problems. This happened just one month after a strike led to unaffordable wage agreements. The process led to about 3,000 job losses. In response, the government injected R10.5 billion to rescue the airline a year later.
