SAA dodges liquidation bullet in rescue plan as DPE pushes for new airline
JOHANNESBURG – The beleagured national airline dodged the liquidation bullet this week after the government stared down the pilots’ last-minute demands while pulling out all the stops to have the business rescue plan approved.
The Department of Public Enterprises (DPE) managed to fend off the pilots while lobbying four of the country’s big banks, who are SAA’s secured lenders and concurrent creditors, to vote for the business rescue plan that would usher in a new national airline.
On Wednesday, the process overcame a major hurdle when Finance Minister Tito Mboweni and Pravin Gordhan, his public enterprises counterpart, promised to bankroll the entire restructuring plan to the tune of R10.3 billion.
Liquidation would have been particularly disastrous for the creditors as there would have been fewer assets for distribution and less packages for employees.
SAA owns low-cost carrier Mango, properties, SAA Technical, A340 four-engine, wide-body aircraft, components and engines as well as trade debtors and some cash deposits.
The banks, the largest voting block collectively, hold government guaranteed claims totalling R16.4bn for historic debt incurred by the airline.
The focus has now shifted to where the money would come from and how the restructured SAA would look.
Aviation economist Joachim Vermooten said the new airline would need a different ethos and philosophy to survive.
“SAA’s mandate needs revision, Vermooten said. “If it operates with the same mandate, it will yield the same results.”
Vermooten said the incoming board and interim chief executive Philip Saunders, who was appointed to steer the realisation of the new airline this week, needed to devise a new business plan.
A total of 86 percent of creditors voted in favour of the adoption of the plan as proposed by the business rescue practitioners – 11 percent higher than the 75 percent needed to implememt the plan.
However, the conditions of the rescue plan have to be fulfilled by Wednesday to avoid it being deemed unimplementable.
On Friday, the creditors would convene to consider amending the plan.
The DPE, which has championed the restructuring of SAA into a new viable and competitive airline, said that different tranches of money would be required as different aspects of the restructuring takes effect.
It said the restructuring included severance packages for about 2 700 SAA employees who would be retrenched and incentives to those at the lower rung of the remuneration scale to ensure that they were not worse off.
An economist who spoke on condition of anonymity said the biggest challenge would be to source funding for the process as it was not yet clear where this would come from.
“There has been talk of finding a strategic equity partner, or using emergency funding, but please don’t quote me on this," said the economist.
"We await further information from the Treasury and the Department of Public Enterprises.
"The Treasury is so exceptionally squeezed at the moment, having to reprioritise funds for Covid-19-related issues.”