SAA business rescue plan looks to government for bailout
JOHANNESBURG - South African Airways’ administrators proposed the government put up at least 26.7 billion rand ($1.5 billion) to rescue the carrier after years of losses and the grounding of commercial passenger flights to contain the spread of coronavirus.
The state-owned airline was placed in a local form of bankruptcy protection in December, and the rescue team led by Siviwe Dongwana and Les Matuson have asked for repeated extensions to the publication of a rescue plan. The document was posted on their website on Tuesday, and will now be reviewed by the government before a vote by creditors.
The state will need to support the airline “during the post ramp-up period until it is profitable and self-sustaining,” according to the rescue plan. SAA has been loss-making for almost a decade and has required repeated government bailouts and debt guarantees to remain in operation.
The funding proposal is about 10 billion rand more than the government was prepared to allocate to SAA in its annual budget in February, when it set aside 16.4 billion rand. Finance Minister Tito Mboweni is scheduled to deliver a revised annual budget on June 24 that will need to provide more resources to the nation’s coronavirus relief efforts.
“We will assess the plan which, we are concerned, might have not been adequately accomplished,” the Department of Public Enterprises said in a statement.
The administrators say 2.8 billion rand is needed to get SAA flying again after months of near inactivity amid the Covid-19 pandemic, alongside 2.2 billion rand to cut the workforce to 1,000 employees from about 4,800. The rescue team earlier proposed the firing of all staff, but Public Enterprises Minister Pravin Gordhan and labor groups intervened to curtail that plan.
State funding will be required to pay off lenders, including the 16.4 billion rand allocated in the February budget plus 600 million rand for dividends for concurrent creditors. About 3 billion rand is needed for ticket refunds and 1.7 billion rand for plane-leasing companies.
Airlines around the world have been left prone by the coronavirus pandemic, which has brought almost all air travel to a halt and is expected to lead to industry losses of $84 billion this year alone. SAA was vulnerable even before the crisis, as years of mismanagement and allegations of corruption eroded the carrier’s finances.
Former SAA Chairwoman Dudu Myeni was banned from holding directorships for life last month and ordered to pay legal costs after a court found her responsible for financial mis-steps at the carrier over several years.