WHAT ARE THE MAIN ISSUES AND CONCERNS?
Questionable conduct and decision with Airbus lease transactions Nov/Dec 2015
On 27 November 2015, the Mail & Guardian reported that “SAA was on the brink of bankruptcy – and it has been put there by its seemingly untouchable chairperson, Dudu Myeni, and her reckless pursuit of an empowerment fantasy at the expense of an airline that is already severely distressed”.
Interviews and internal documents obtained by amaBhungane reveal how SAA has been steered towards a debt mountain by Myeni’s insistence on overturning a R9-billion deal with aircraft manufacturer Airbus that the treasury had checked and approved.
Instead of allowing the approved deal to go ahead, Myeni attempted to use it to incubate a then unidentified new African leasing company (Quartile Capital) to take over the transaction – and to insert her hand-picked transaction adviser to manage the process.
The interference prompted Airbus to demand immediate payment of $17-million (R240-million), which SAA could not afford. In a memo, drafted by then chief financial officer Wolf Meyer, warned the SAA Board that if Airbus decided to issue a default notice as a result of this questionable plan, the move will likely trigger cross-default clauses on other loans and leases – meaning that banks and lessors have the right to call for full repayment of all outstanding debt.
As a consequence, the government would face claims against existing government guarantees amounting to some R11-billion.
Wolf Meyer resigned in November saying that he could no longer associate himself “with the conduct of the board”.
Fortunately, on Thursday 3 Dec, 2015, the SA Treasury, under the leadership of Minister Nhlanhla Nene, put its foot down on a proposed restructuring of a transaction with aircraft manufacturer Airbus, saying that it presented too high a risk of leaving SAA in a materially worse off financial position and triggering payments under government guarantees. Nene ordered SAA to proceed with the original leasing arrangement on 3 Dec, 2015, however, he was fired six days later by President Zuma, who eventually replaced him with Minister Pravin Gordhan.
OUTA believes that the intentions and conduct of Ms Myeni and other members of the board were not in the best interests of the airline, and would have put the organisation at financial risk, and more debt to the tax-payer, had she been allowed to proceed with this transaction.