State backs R10bn SAA BRPs plan
JOHANNESBURG - Plans for the restructured SAA received a major boost yesterday when the government committed to fund the R10billion needed to conclude the final stages of the airline's business rescue plan that would pave the way for the new national carrier.
Public Enterprises Minister Pravin Gordhan and his finance counterpart, Tito Mboweni, gave an undertaking to raise funding for SAA to finance its immediate as well as medium- and long-term processes.
Gordhan and Mboweni assured the business rescue practitioners (BRPs) in a signed letter of support on Wednesday evening that the government was committed “to mobilise funding for the short, medium and long-term requirements to create a viable and sustainable national airline.”
The funding commitment came a day after the business rescue plan was endorsed by an overwhelming majority of creditors, and veteran aviation executive Philip Saunders was appointed as interim chief executive to lead the restructuring of the 86-year-old airline.
Gordhan and Mboweni’s pledge gave effect to the Cabinet’s endorsement of a business rescue plan for SAA and the Cabinet’s position that “it supports the proposal for a new airline and the concerted effort to mobilise funding from various sources, including from potential equity partners for the uptake of the new airline,” according to the letter.
SAA BRPs have said that they needed at least R10.3bn in the next three years to revive operations, provide working capital and fund the estimated R2bn in voluntary retirement packages that would see it halving its staff complement.
The Department of Public Enterprises (DPE), which has championed the restructuring of SAA into a new viable and competitive airline, yesterday said that different tranches of money would be required as different aspects of the restructuring take effect.
The DPE said the restructuring included severance packages for about 2700 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.
It said it was cognisant that airlines across the world were in turmoil due to the Covid-19 pandemic.
“There are possibilities for airline partnerships to improve the scale and scope of the aviation industry and ensure continuity of value creation to the South African economy,” said the DPE, adding that it aimed to attract diverse investors.
“While maintaining a certain level of presence in the ownership of the new carrier, the DPE welcomes the attraction of a mix of local and international investor groups to provide the new airline with technical, financial, and operational expertise to ensure significant South African ownership while diversifying the investor base.”
The SAA Pilots’ Association welcomed the confirmation of the funding for the business rescue plan.
“With this funding, the hard work of restoring SAA to profitable and sustainable operations can begin,” the association said. “The investment of taxpayer funds in this particularly difficult economic environment is not a sacrifice we take lightly.
"A successful exit from this process will mark the beginning of a new chapter for our company, and an opportunity to turn SAA into a profitable, globally competitive airline that is no longer reliant on the fiscus.”
The association, which previously tried to solicit last-minute concession for the pilot's severance packages, said it had always been its priority to save jobs, reduce reliance on the fiscus and ultimately to save the airline.
BUSINESS REPORT ONLINE