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Government-Backed Rescue of South African Airways Could Cost $1.5 Billion

Government-Backed Rescue of South African Airways Could Cost $1.5 Billion

Is South African Airways Actually the Best Airline in the World?

Plans to rescue loss-making South African Airways (SAA) could cost taxpayers an “obscene” 32.65 billion Rand (USD $1.5 billion) according to a proposal put forward by the airline’s administrators. The sum is significantly more than the $263.44 million rescue package put forward by the administrators just a couple of weeks ago but would be needed to shore up the airline after a decade of heavy losses.

The airline was placed into a form of bankruptcy protection, known as business rescue late last year but plans to restructure the airline have changed several times over the last six months. Administrators recently suggested liquidating the airline but South Africa’s ruling government pushed for a rescue package to create a “New South African Airways”.

The opposition Democratic Alliance party has branded the proposals “obscene” and claims “liquidation is the only realistic option for SAA at this point”. The party has requested an investigation by competition authorities because they claim SAA will enjoy an unfair advantage over rival airlines in the country.

Staff retrenchments will set the government back 2.2 billion Rand in order to slash the airline’s headcount to just 1,000 employees from the current 4,800 strong workforce. A further 2.8 billion rand will be needed just to get the airline back in the air following the COVID-19 pandemic.

Lenders will require 16.4 billion Rand in unpaid debts and claims for refunds on unflown tickets will cost taxpayers 3.2 billion Rand according to the proposals.

The administrators have given ministers until July 15 to agree to the business rescue plan. The South African government is set to review the proposals ahead of a crucial budget meeting on June 24. The bailout is around 10 billion Rand more than the government was originally prepared to spend on the airline.

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