R5bn lifeline for troubled SAA

SA AIRWAYS has been given a R5 billion guarantee by the government, the National Treasury said yesterday.

“The South African government has granted SA Airways a R5 billion guarantee for a period of two years starting from 1 September 2012,” it said.

SAA had requested recapitalisation, at an estimated cost of between R4bn and R6bn.

This would enable it to strengthen its balance sheet and order new planes.

In terms of the guarantee, the SAA board had to develop a turnaround strategy, to be approved by the Minister of Public Enterprises, Malusi Gigaba and the Minister of Finance, Pravin Gordhan.

SAA had to provide the Department of Public Enterprises and Gordhan with its financing strategy for its planned purchase of a short- and long-haul fleet.

Last week, chairwoman Cheryl Carolus and six other members of the SAA board resigned.

Carolus was quoted as saying: “The board has become untenable, our reputation and professional integrity had just been dragged through the mud without any clarification or support, and I believe this had reached a point where the relationship has been broken irretrievably.”

In 2004, a hedging loss of R6bn wiped out the company’s capital base, and in 2008, soaring oil prices led to another R1bn hedging loss. – Sapa