Flight International 09Mar2020

AIR TRANSPORT

12 | Flight International | 3-9 March 2020 flightglobal.com

T

he chaotic condition of South
African Airways’ (SAA) or-
ganisation has been revealed to a
judicial commission examining
allegations of corruption and
fraud in state companies.
South Africa’s auditor general’s
office participated for the first
time in the audit of SAA’s full-year
financial statement covering 2016-

2017. SAA was experiencing li-
      quidity problems and could not
      provide the office with financial
      statements until October 2017,
      five months behind schedule.
      Auditor general business exec-
      utive Polani Sokombela described
      aspects of SAA’s organisation as
      “quite dire”, and detailed multi-
      ple concerns after its audit of the
      company’s financial state.
      Sokombela told the inquiry on
      21 February that the airline was
      experiencing “a lot of instability”
      at the time, with more than 40%
      of its executive committee posi-
      tions filled in an acting capacity.
      There was no permanent chief ex-
      ecutive, or head of finances, com-
      mercial activity, and strategy, and
      SAA did not have sufficient avia-
      tion specialists at board level.

INVESTIGATION DAVID KAMINSKI-MORROW LONDON

SAA organisation is ‘dire’, says auditor

Inquiry highlights insufficient experience at executive level, ‘questionable’ supply contracts and poor record-keeping

Carrier faced ‘serious challenge’ complying with financial legislation

Shutterstock

A

litalia’s new commissioner
has proposed trimming part
of the Italian carrier’s operations
during meetings with key unions.
Commissioner Giuseppe Le-
ogrande took over as a single
commissioner for the carrier,
which remains in extraordinary
administration, after plans fell
through for a consortium of in-
vestors to take over the airline.
Union FIT-CISL says Le-
ogrande informed members of
proposals to close unprofitable
routes and reduce the fleet by
three aircraft, from 113 to 110.
The aircraft would be with-
drawn through the end of leases.

Union members were told fleet could be reduced by three aircraft

Shutterstock

But the union says the econom-

ic development minister needs to

convene a meeting with workers’

representatives and “tell us what

he wants to do with Alitalia”.

The Union says the network

closures would be aimed at long-

haul routes.

FIT-CGIL chief Fabrizio Cusci-

to says: “There was also talk of

the possible impact of route

closures on the extent of lay-offs

for pilots and cabin crew.”

But no details have been final-

ised, he adds.

Cuscito warns that the need

for sacrifices during any restruc-

turing of Alitalia “cannot fall

again on workers”.

FIT-CISL says the commis-

sioner advised that the entire

company is being examined for

areas of improvement.

INSOLVENCY DAVID KAMINSKI-MORROW LONDON

Alitalia commissioner proposes cuts to operations

FIT-CISL points out that the

collapse of Air Italy indicates

that the entire sector, rather than

individual airlines, is showing

signs of problems. ■

Nor did the carrier have

enough individuals with “appro-

priate competencies” regarding

preparation of financial state-

ments, understanding of regula-

tions for supply-chain manage-

ment, or compliance with the

South African treasury’s frame-

work on performance reporting.

“We ended up having a lot of

findings in those areas,” Sokomb-

ela says, adding that compliance

with legislation was a “serious

challenge” at SAA.

The airline’s annual report, he

pointed out, admitted to irregular

expenditure of R125 million ($8.

million), a sharp rise on the previ-

ous year’s figure. But he says the

auditor general’s office could not

find evidence of “consequence

management” – namely any sanc-

tion against transgressors.

Sokombela also points to a lack

of capacity in the legal divisions

tasked with overseeing SAA con-

tract management. While success-

ful suppliers were notified by let-

ter when awarded a tender, he

says, this was not always accom-

panied by a formal contract.

“That was a big risk for SAA,”

says Sokombela. “Because if you

don’t have a contract signed with

your suppliers, how are you going

to control them?”

SAA had a “very big” contract

register, he says, but for the “ma-

jority” of them the auditor gener-

al’s office “could not find signed

contracts”, so the credibility of the

register was “questionable”.

Sokombela describes SAA’s re-

cord-keeping as a “significant

concern”, telling the inquiry that

obtaining information would

sometimes take three months.

“This has resulted in signifi-

cant limitations of scope on our

side, due to that issue, especially

in the areas of supply-chain

management and also assets of

SAA,” he says.

South African president Cyril

Ramaphosa, who established the

judicial inquiry in 2018, author-

ised investigators earlier in Feb-

ruary to probe allegations of

corruption and unlawful conduct

at the carrier.

SAA has since December 2019

been subject to a “business res-

cue” restructuring process,

which has involved cutting

around half of its long-haul

routes and almost all of its do-

mestic network.

The move is designed to con-

serve cash and create a viable plat-

form for the future. This will also

involve SAA’s use of more fuel-ef-

ficient aircraft and renegotiation of

contracts with suppliers, as well

as reduced staffing levels. ■