The Department of Public Enterprises (DPE) and the National Treasury have given the new South African Airways (SAA) board until January to finalise a credible turnaround strategy, following the recent extension of a R5-billion government guarantee to the struggling State-owned company (SoC).

DPE director-general Tshediso Matona told Engineering News Online on Thursday that, although the deadline was “tight”, government was convinced that a “robust” strategy could be developed within the timeframe outlined, probably with the support of outside consultants.

He also acknowledged that the previous board – eight of whose members, including chairperson Cheryl Carolus, resigned earlier in the month citing a breakdown in relations with the shareholder Minister, Malusi Gigaba – had made progress in defining the new strategy.

However, their work had been somewhat “eclipsed” by the immediate imperative of securing a guarantee that was sufficient in scale to ensure that concerns could not be raised about whether SAA was a sustainable going concern.

Serious discussion with the National Treasury on the guarantee had been under way since April and the decision to delay the annual general meeting until October 15, had been dictated, in large part, by a desire to align the release of the 2011/12 annual report with that process. Had the guarantee not been secured the annual report would have received a qualified audit.

The new strategy should outline how costs would be cut and contained, and whether there were possibly operational synergies to be obtained through a consolidation of activities with fellow SoC, SA Express.

It would also need to outline how the route network should be operated to improve profitability, while meeting the South Africa government’s aspiration for greater African integration and increased regional and global tourism. The plan would also need to outline how the fleet should be altered to lower fuel costs, while meeting the demands of the route plan.

The future role of SAA’s various subsdiaries would also need to be interrogated.

Matona acknowledged the anxiety of South African citizens and SAA competitors over the latest guarantee. But he stressed that government still saw the airline a "national asset" that should be supported by its shareholder.

“But there is a strong feeling across government that, if we fail this time around, we will have to re-examine our options with regard to the airline,” Matona said, noting that Cabinet was paying close attention to developments.