< Reveal sidebar

South African Airways to Receive $1.2 Billion Government Bailout

A South African Airways A340-600 on approach to Frankfurt. (Photo: AirlineGeeks | Fabian Behr)

The South African government has agreed to finance the restructuring of South African Airways (SAA) as indicated in a copy of a draft plan shown on Monday.

The draft plan involves a government agreement to spend R21 billion ($1.2 billion) to restructure SAA. According to the draft plan, a working capital injection is estimated at not less than R2 billion to restart operations once there are relaxed travel restrictions brought up by the coronavirus pandemic.

In addition, another R2 billion will be required to fund employee retrenchment and a further necessary allocation of R17 billion with at least R600 million towards repayment of general concurrent creditors, according to Bloomberg.

The draft plan is still subject to discussions with the affected persons and the team has until June 8 to finalize the proposal.

Public Enterprises Minister Pravin Gordhan who was to oversee the turning around of the airline was in complete objection of the new draft plan and had previously announced his ambition of creating a new airline at the start of this month.

The rescue practitioners had described the prospects of restructuring the struggling airline as “reasonable” and dependent on necessary funding.

“It is the considered view of the business rescue practitioners that there is still a reasonable prospect of rescuing SAA, subject to the receipt of unequivocal commitment thereto and the requisite funding,” said the practitioners.

The rescue team had earlier warned of not having enough funds to pay the salaries of all staff for the month after their earliest request for more state funding for the airline was denied, which lead to the team subsequently proposing firing all of the airline staff to stave off liquidation.

“SAA does not have sufficient funds available to pay salaries to all of its employees and, in fact, does not have sufficient funds to pay certain of its post-business rescue costs,” said the practitioners.

The state-owned airline has been drawing up some political grandstanding and building uncertainties over its future, spending nearly six months in the business rescue process -a local form of bankruptcy protection. The carrier entered the business rescue program in December 2019 in which business rescue practitioners Les Matuson and Siviwe Dongwana took over the running of the cash strapped airline with an aim of restructuring it.

It is also understood that the practitioners were in the advanced stages of drawing up a draft plan before the country went on lockdown on March 26.

“Unfortunately, the draft plan for a restructured airline which was near complete could not be finalized owing to the impact of the coronavirus crisis which nullified all the assumptions on income projections,” noted the practitioners.

The new funding for SAA will now bring an end to the impasse between the government and business rescue team after months of hiatus over the future of the airline with earlier reports indicating the possible cease of operations for the Star Alliance member in favor of a new national airline formed on the debris of SAA.

Although most of its passenger fleet remains grounded, SAA has continued to operate repatriation flights including 56 repatriation flights to six continents during the lockdown period.

Victor Shalton

Author

  • Victor Shalton

    Born and raised in Nairobi, Kenya, Victor’s love for aviation goes way back to when he was 11-years-old. Living close to Jomo Kenyatta International Airport, he developed a love for planes and he even recalls aspiring to be a future airline executive for Kenya Airways. He also has a passion in the arts and loves writing and had his own aviation blog prior to joining AirlineGeeks. He is currently pursuing a bachelor’s degree in business administration at DeKUT and aspiring to make a career in a more aviation-related course.

Subscribe to AirlineGeeks' Daily Check-In

Receive a daily dose of the airline industry's top stories along with market insights right in your inbox.

Related Stories

U.S.-Nigeria Air Transport Agreement Signed After 24-Year Wait  

The long-awaited U.S.-Nigeria Air Transport Agreement has finally come into force on May 13, 2024, marking a milestone in the…

A WestJet Link Saab 340

WestJet Ending Link Regional Service, Transitioning Flights to Encore

WestJet has announced that it will be ending the WestJet Link regional brand and transitioning its flights to WestJet Encore.…

United Gets FAA Green Light to Again Certify Aircraft, Add New Routes

United can once ramp up the certification of aircraft and add new routes after a nearly two-month-long FAA-mandated pause due…