In a new development, embattled South African Airways (SAA) is to receive a total of 4 billion Rand (USD $273 million) in new financial assistance guaranteed by the government in order to keep the heavily loss-making flag carrier flying. The Minister for Public Enterprises, however, was keen to stress that the financial injection was not a “bailout”.
The extra funds have been guaranteed after senior executives at SAA agreed to place the airline into a formal process known as Business Rescue.
Under the new rescue plan, a Business Rescue practitioner will be appointed to take charge of SAA and “provide assistance” to the airline’s current management. The practitioner will be given sweeping powers and is allowed to make “such rationalizations as necessary” – such as massive cost-cutting measures and staff redundancies.
On Sunday, the government said it was necessary to introduce a “radical restructuring process” at SAA after the airline was forced to concede to demands made workers such as cabin crew and engineers who downed tools last month. The walkouts cost the carrier at least R50 million ($3 million) per day and SAA had to row back on plans to axe around 944 employees as part of an urgent cost-cutting move.
South African Airlines is said to have made losses of R28 billion in the last 13-years and financial analysts estimate SAA lost R9 billion in 2018 alone – although the airline still hasn’t released its financial results for last year.
“Our desire is that the restructured airline will mark the beginning of a new era in South African aviation,” wrote the Minister for Public Enterprises, Pravin Gordhan.
“It must be clear that this is not a bailout. This is the provision of financial assistance in order to facilitate a radical restructure of the airline,” Gordhan continued.
Along with a new R2 billion loan, the government will also gauruntee a further R2 billion in loans from SAA’s existing lenders.
