SAA targets revamped take-off in January
International and local investors ‘offering partnerships with airline, subsidiaries’
● The government is aiming to relaunch SAA in January, and is working on partnering with private sector investors.
By the beginning of August, it had received more than 10 “unsolicited” offers from investors seeking to partner with SAA and its subsidiaries, said Kgathatso Tlhakudi, the director-general of the department of public enterprises, on Friday.
Responding to questions from Business Times, Tlhakudi said the government was “looking at January 2021 in terms of the new restructured airline taking to the skies”.
He added that parties were interested in tie-ups with SAA and subsidiaries Air Chefs, SAA Technical and Mango.
The interest of “local and international investor groups vindicates our conviction in the restructuring process. We are whittling these down to a consideration of just a handful of potential partners, who will work with the government in this project.”
It is understood that RMB is the transaction adviser to the government.
Tlhakudi said the department would “grab the opportunity to work with new partners that will help the airline with technical, financial and operational expertise to ensure significant South African ownership while diversifying the investor base”.
He said the department would also announce a new board for the airline “at the appropriate time” so that it can break with the “past patterns of poor performance and corruption”.
But to get SAA up and running will require R10bn — funding the government has yet to secure.
It is understood the airline has not been handed back to management or its board by the business rescue practitioners. This is the usual procedure once a business rescue plan has become unconditional, which in SAA’s case it has, and funding is secured.
Major banks, which have previously funded SAA, have apparently declined to fund the efforts to resuscitate the airline, according to market speculation. Absa, Nedbank, Investec, Standard Bank and RMB, on behalf of FirstRand, declined to comment.
The Development Bank of Southern Africa has been repaid the R3.5bn it lent to SAA and it is understood that the banks are due to be repaid at the end of August.
Nedbank, Investec, FirstRand, Absa and Standard Bank provided R2bn after SAA entered business rescue, and lent the airline R9.2bn last year before the business rescue process began. Their loans were guaranteed by the government.
Asked about funding, Tlhakudi said the government and SAA continue to “interact with the market about raising the money required for the project”.
He added: “Several financing options are open to the department and SAA and we will continue to explore them. Admittedly, it is a complicated process due to some constraints, including the generally gloomy economic environment and the specific difficulties facing the aviation sector.”
Asked for comment about the provision of funding for the airline, joint business rescue practitioners Les Matuson and Siviwe Dongwana said “the provision of funding aspect of
SAA did not fall within our business rescue remit” and they were not able to comment.
They did say, however, “as was outlined in the plan it is critical to get working capital into SAA to enable it to restart such as it can pay its trade creditors and salaries, for instance”.
Will break with past patterns of poor performance and corruption Kgathatso Tlhakudi Director-general, department of public enterprises
The business rescue practitioners have approved the majority of voluntary severance applications with staff, which, once finalised, would enable them to “have a sense of what is left relative to the number of employees needed to restart the airline”, they said. In addition to the voluntary severance process, they have initiated a section 189 retrenchment process. The new SAA plans to employ 1,000 people, down from 4,708.
Tlhakudi said the department continues to “work with the business rescue practitioners and other stakeholders on the implementation of the plan”.
While some have been or will be repaid in full, other creditors will get 7.5c in the rand in terms of the business rescue plan.
Private airline Airlink, for example, is owed R500m by SAA.
Airlink CEO Rodger Foster said: “The business rescue plan has become unconditional as notified by the department of public enterprises last week, but why then has SAA not been handed back to management and to the board, and where specifically is the funding? Because it does have implications for Airlink customers and Airlink.”
He said SAA had not yet honoured the R3.2bn in “unflown ticket liabilities” to customers, which had been agreed to in terms of the business rescue plan.
Foster said in terms of the franchise relationship it had with SAA, an Airlink customer would book a flight on Airlink through the SAA booking system and remit the prepayment to SAA.
SAA would hold the money on behalf of Airlink until Airlink delivered the service to the customer. The money would then be paid by SAA to Airlink.
“A lot of our customers bought tickets in the pre-commencement period. We would like this money … transferred to Airlink,” said Foster.