Plan to rescue SAA still rocky

R10.5BN: ‘WOOLY’ COMMITMENT FROM GOVERNMENT

Public enterprises bigwig says the money needed is deemed ‘burden on the state’. Moneyweb

It has been just under eight months since South African Airways (SAA) was put into business rescue. The process to turn around the airline has been tumultuous and, with the business rescue plan almost at the point of implementation, the question is what will it take for it to fly?

In June the director-general and chief executive of the International Air Transport Association, Alexandre de Juniac, said “financially, 2020 will go down as the worst year in the history of aviation”.

It is under this shadow that SAA hopes to restructure its operations and build a commercially viable national carrier, using a R27 billion plan that involves settling its old debts and restarting operations

The R27 billion includes the R16.4 billion commitment the government appropriated in the February budget to settle guaranteed debt and interest.

Reflecting on the past eight months, public enterprises acting directorgeneral Kgathatso Tlhakudi said: “The work could have been done a lot faster and unfortunately the result of it is that funding that would have been used for the restructure basically got exhausted dealing with operational expenses.”

The question of who will fund the restructure has come under scrutiny following the woolly letter of commitment from government.

Government, represented by

Minister of Public Enterprises Pravin Gordhan and Finance Minister Tito Mboweni, has presented business rescue practitioners Leslie Matuson and Siviwe Dongwana with a letter in which it commits to “mobilise funding for the short, medium and long term requirements”... The airline will need R10.5 billion for working capital, paying creditors and covering retrenchment packages.

As a precondition to the rescue plan’s implementation, government must provide confirmation that it will “support and commit to providing the requisite funding” for the various items.

Tlhakudi would not be drawn on how the government aims to “mobilise” the funding, but says the “unfortunate narrative” that has taken hold is that the money would be a “burden on the state”.

See page 18.

2020 the worst year in the history of aviation