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South African Airways Liquidation Unlikely for Now
The immediate liquidation threat of South African Airways (SAA) may be averted for now as announced by the Department of Public Enterprises (DPE) on Saturday. The new deadline for the proposed employment agreement has also been extended to May 1, 2020.
DPE also acknowledged an agreement was reached in a meeting to establish “different cooperative relationships based on a spirit of strategic partnership,” following political grandstanding between the Business Rescue Practitioners (BRPs) and the workers’ union who are accusing the BRPs of “having an agenda to strip off the airline’s assets and liquidate it.”
“The leadership recognizes the enormity of the challenge but are unequivocally committed to saving SAA and shining the torch to a new world post-COVID-19 in which SAA is a key catalyst for investment and job creation,” stated the DPE.
“The vision agreed (for SAA) by the parties is a national asset which is internationally competitive, viable, sustainable and profitable.”
The BRPs, tasked with ‘rescuing’ the debt-laden airline had earlier resolved to issue a severance pay to all staff last week after failing to secure additional bailout package from the government, with the trades’ union given until last Friday to respond to the proposed offer. The proposal has since built on a collision course with the government and the trade unions.
According to the Company Act, the business rescue proceedings should ideally have lasted for three months. A meeting is also to be convened in the coming days between the BRPs and the DPE to evaluate “the gravity and risk of further extensions of the much-required funding for the restructuring process of SAA.”
The South African government decided to halt its cash infusion and further guarantees to SAA’s borrowing in a letter dated April 10, trying to get the airline to move towards solving its woes and seek profitability using alternative resources, having already induced 2 billion rand ($211 million) at the beginning of the year to help the airline deal with its short term liquidity problems.
The insolvent airline last operated at a profit in 2011 and has since been surviving on taxpayer money that amounts to over $4 billion USD. With the looming coronavirus pandemic also taking part in SAA’s downfall, bringing with it imposed travel restrictions and travel restrictions worldwide, the airline has been forced to only operate cargo planes and chartered flights with no regularly scheduled passenger flights for the time being.
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