Govt agrees to new SAA bailouts in about-turn

The government has agreed to more bailouts for South African Airways (SAA), reversing its previous stance, a draft rescue plan showed, with the airline’s administrators saying R4.6 billion new money could be needed.

After almost a decade of losses, state-owned SAA entered business rescue in December. Its fortunes deteriorated when the Covid-19 pandemic forced it to halt all commercial passenger flights in March and in April, the government said it would not provide more funding for rescue efforts.

But a draft business rescue plan for the airline, made public by the Democratic Alliance, showed the government had changed its stance by agreeing to fund a proposed restructuring.

A spokeswoman for the administrators confirmed the document was genuine, but said: “It is for discussion purposes only, and we await comment from the affected persons.”

The draft, seen by Reuters, said the government had agreed to make a working capital injection, of which the administrators estimated at least R2 billion would be needed, and fund employee layoffs, which could cost up to R2 billion.

The government would also make an allocation of at least R600 million towards repaying some creditors. That is on top of R16.4 billion the government set aside in February to repay SAA’s guaranteed debt and cover debt-service costs.

The draft plan proposed halving the airline’s staff to about 2 500 and also halving its number of aircraft to 20 in the coming years.

The administrators said that prior to Covid-19, they had been speaking to three parties potentially interested in partnering with SAA as a strategic equity partner or by forming an alliance agreement.

“All these engagements took place pre-Covid-19 and would be revived once the aviation industry is back on its feet,” they were quoted in the plan as saying.

SAA has received more than R20 billion in bailouts in the last three years. A draft rescue plan from early May showed the administrators then recommended winding down the airline in the absence of additional government funding. But officials have since stepped up pressure on the administrators for a plan to salvage SAA. The public enterprises department said yesterday it had not yet discussed the draft business rescue plan. – Reuters