Further R7.7bn pivotal to SAA rescue

By Siphelele Dludla Time of article published May 17, 2020

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JOHANNESBURG - Loss-making state-owned airline business rescue practitioners require a financial commitment from government in order to resuscitate successfully, writes Siphelele Dludla

SAA BUSINESS rescue practitioners (BRPs) have argued that the stateowned airline cannot be salvaged without any commitment for further funding from the government. 

Siviwe Dongwana told Parliament on Friday that the rescuers needed the government to commit at least R7.7 billion more for SAA to be successfully restructured. The government has declined to grant SAA any more funding after giving the airline R5.5bn, saying that the BRPs must come up with a rescue plan within allocated resources. 

Dongwana said the funding commitment would enable the BRPs to complete the SAA business rescue plan which has been in the making for six months now. 

“What is important is for us to have a commitment of whether or not the restructuring will be funded because that enables the development of a plan to be in a context of a very specific budget. “It also enables us to put the plan to creditors’ approval to be able to answer some specific questions, for example, how are we going to deal with a dividend to creditors, if at all.” Dongwana said the BRPs had spent R9.9bn by the end of last month since they took over the running of SAA when it was put under voluntary business rescue on December 5, last year. He said 20 percent of the post-commencement funding went to fuel, 16 percent to salaries and allowances, 36 percent to subsidiaries, aircraft leases and SA Airlink, and 28 percent went to “other” expenses. 

On Thursday, SAA told Parliament that it made losses of R5.5bn in 2018 and R5.1bn in 2019. 

The troubled airline presented financial statements that had not been tabled since 2017, shwing that the government had given it a total of R31.4bn in cash injection since 2003 and guarantees of R19.11bn though not all of them were used. 

Dongwana said the BRP cancelled SAA contracts with a price that was “above commercial terms” as well as commissions and retainers, and cancelled loss-making routes to save costs. He said the development of a rescue plan that contained projections for at least the next three years, with a focused balance sheet and income statement, as required by the Companies Act, would only be possible if it was underpinned by a funding commitment. 

“Our view is that in the absence of funding, the best way forward is not to liquidate but it is to run a structured wind down and the draft business rescue plan is contemplating a winding down process,” Dongwana said. “To the extent that we do not have a committed amount to support the business rescue and the restructuring of the company it becomes difficult to do that. It is up to us as business rescue practitioners to look at how we respond adequately to this issue.” 

BUSINESS REPORT 

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