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Creditors Approve New Rescue Plan for South African Airways
South African Airways has had yet another business rescue plan approved by creditors. The new plan requires at least 10 billion rands funding ($596 million) of government funding to sustain the airline. This was approved during a creditors meeting held on Tuesday, July 14 by 86% of voters, as reported by FlightGlobal.
At the meeting, Administrator Siviwe Dongwana said: “The practitioners welcome the approval of the business rescue plan with an overwhelming majority of those who voted. It is an important step forward for the airline and provides much-needed certainty towards a restructured SAA.”
South Africa’s companies require at least 75% business rescue plan approval from creditors to restructure a business. Otherwise, companies should be liquidated.
At the same time, as Mail & Guardian reports, Kgathatso Tlhakudi, acting director of South Africa’s Department of Public Enterprises praised the approval of the new business rescue plan, calling it as a matter of national interest under the allegation that maintaining South Africa’s flag carrier would help reactivate South Africa’s economy.
South African Airways was placed under bankruptcy protection in December 2019, where practitioners were appointed to restructure the airline and make it more efficient. However, as COVID-19 paralyzed global mobility and made South African Airways accumulate even greater levels of debt; the carrier’s future was on the fringe again.
As the new business rescue plan is approved, South Africa has yet another chance to maintain a flag carrier, something which the government has been availing over the years, as South African Airways continued to rack up ever-growing losses. Maintaining South African Airways afloat is something that has been largely pushed for by South Africa’s Department of Public Enterprises, which has been looking for mechanisms to restructure the country’s flag carrier rather than liquidate it.
The first phase of the new South African Airlines would last for eight months and look to have a fleet of 26 aircraft and retain 1,000 jobs by the first quarter of 2021. As part of the new plan, the airline will also need to use the cash to be acquired to pay severance packages to more than 2,700 employees who have been placed on leave. This will cost the carrier 2.2 billion rand ($132 million).
Retained employees will be kept on duty on a rotation basis, between work and training for the following year as passenger numbers remain low.
Authorities have already appointed Philip Saunders as the airline’s new interim CEO and have begun the process to appoint a new board soon. Saunders served before as the carrier’s chief commercial officer and has also held positions at Kuwait Airways and Air Malta.
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