South African Airways is to receive a R4 billion ($273 million) in funding as part of the effort to restructure the ailing flag-carrier following its placement into business rescue.
South African Airways is to receive a R4 billion ($273 million) in funding as part of the effort to restructure the ailing flag-carrier following its placement into business rescue.
Business rescue is a measure intended to allow financially-distressed companies to recover, under an appointed rescue practitioner, while respecting the interests of its creditors and stakeholders.
Loss-making SAA has been facing the prospect of drastic action as a result of lack of progress with its turnaround programme, management upheaval, and – most recently – operational disruption from industrial action.
South Africa’s public enterprises minister, Pravin Gordhan, insists that business rescue is the “optimal mechanism” through which to restore confidence in the carrier, and that the government is taking steps for an “orderly and methodical” restructuring.
“It must be clear that this is not a bailout,” he says. “This is the provision of financial assistance in order to facilitate a radical restructure of the airline.”
The process will involve a R2 billion injection of funds from existing lenders, guaranteed by the government, to enable the rescue work to begin and allow SAA to continue operating.
Another R2 billion will be provided by the government, through the South African national treasury. Gordhan says this will be supplied in a “fiscally neutral manner”.
The scheme will aim to prevent a “disorderly collapse” of the flag carrier, the ministry adds.
“It will provide an opportunity to critically review the cost structure of the airline, while simultaneously attempting to retain as many jobs as possible,” says Gordhan.
“This reality was clearly understood in the recent wage negotiation process between the unions and the company.”
Gordhan says the measures will attempt to turn SAA into a sustainable operator which will ultimately become attractive to an investment partner, adding that the rescue practitioner will undertake whatever “rationalisations” are deemed necessary.
The rescue process will formally commence on 5 December.
“There will not be any unplanned stoppages of flights or cancellation of flights without proper notice should that be necessary,” says Gordhan, adding that the government wants customers to remain confident in the airline.“Our desire is that the restructured airline will mark the beginning of a new era in South African aviation and must be able to bring in millions more tourists,” he state
