SAA chairperson of the board implementation committee Martin Kingston on Wednesday warned that the embattled airline’s liquidity was on the brink of collapse. Photo: Supplied

JOHANNESBURG – SA Airways (SAA) chairperson of the board implementation committee Martin Kingston on Wednesday warned that the embattled airline’s liquidity was on the brink of collapse.  

Kingston said lenders would not advance the airline any further credit without the security and support of a sovereign guarantee.

Kingston said SAA was in talks with the National Treasury to use the surplus guarantees it had in its balance sheet, but the Treasury wants to be satisfied that the money was for appropriate use. “Unless we are able to secure guarantees from the National Treasury – and we are in discussions with them – then the board will have to recommend to the government that actually it be placed into liquidation, because we have no confidence that we are going to trade responsibly,” he said.

The chilling warning comes as SAA yesterday moved to assure the markets that it would be reinstating selected local flights from Johannesburg to Cape Town and Durban today after all domestic routes were cancelled for a week due to the strike. 

Kingston said lack of guarantees could ground SAA forever.

“Barring that, we will have to responsibly close down SAA and salvage what aspects of the business are salvageable. That would be extremely unfortunate. I characterise it as a catastrophic outcome. The shareholder has indicated that it is not prepared to put any further funding behind SAA.”

On Tuesday, Public Enterprises Minister Pravin Gordhan told SAA executives and unions that the government was not in a position to make money available for workers’ 8 percent salary rise demand.

Gordhan said the government had provided more than R20.5 billion of fiscal support to SAA. Yesterday, SAA and unions met again under the auspices of the mediator.

Officials declined to comment on the talks until the process was completed.

Kingston said SAA needed to secure the R2bn debt  for working capital immediately to avoid a catastrophe. 

“In fact, we need to secure some proportion of that debt before the end of the month, in order to be able to pay people salaries,” he said.

“The bigger problem we have is that Rome is burning. We don’t have the time or the luxury to consider industrial action in any way, which harms or undermines the prospects of SAA.

“This is exactly what this strike is doing to SAA. It is actually pushing us to the precipice rather than helping us salvage the airline.”

Kingston said SAA would be briefing Parliament next week about the road map on how and when the airline would produce its financial statements. 

“The problem that we have with the accounts is we don't know whether to prepare them on a going concern basis or on a liquidation basis. If we prepare them on liquidation basis, the company needs to be placed into liquidation. 

“That has catastrophic implications, not only for the company, but for many stakeholders. It's the last thing we want to do. But if we prepare them on a going concern, we need to be confident that we have the financial wherewithal to trade for the next 12 months on a solvent basis. That is currently not the case.”

BUSINESS REPORT