South Africa’s national airline South African Airways is in bad shape and just received another Multimillion (135) dollar bailout from the government to pay back debt to creditors .
Usually when an airline is the transportation backbone of a country the government has no other chance than to step in and inject money into their national carrier as letting them go bankrupt would be a logistical nightmare.
You can read up more at South Africa’s Sunday Times (see here).
The government has again come to the rescue of the financially crippled South African Airways (SAA) with a bailout of R3-billion. SAA will repay its Citibank debt of R1.8-billion and will use the rest as working capital.
In a statement on Friday the Treasury said the money will be transferred from the National Revenue Fund to help SAA with its “immediate working capital requirements” and to avoid defaulting on their Citibank loan.
This payment was done in terms of section 16 of the Public Finance Management Act. This section of legislation states that the Minister can authorise the use of funds to defray expenditure of an exceptional nature. …
TimesLIVE previously reported that SAA owed nearly R7-billion. It was recently ordered to pay back R1.8-billion to Citibank by September 30‚ just two months after receiving a government bailout of R2.3-billion to pay back money owed to Standard Chartered Bank.
In August SAA announced its intention to make changes to its network as part of a newly developed five-year plan to bring financial sustainability to the airline. “The airline remains a strategic asset and in its role as the flag carrier‚ it serves as an economic enabler with direct and indirect benefits across a wide range of economic activity‚” Friday’s statement said.
SAA’s new chief executive‚ Vuyani Jarana‚ is starting work on November 1 on a five-year contract. “Further appointments to fill other critical executive positions will follow shortly‚” the statement said.
From the state of affairs reported it’s clear that there is much more underlying debt than even this most recent bailout is able to satisfy. In fact there is plenty more and an airline like SA is running through money faster than a furnace.
It will likely not take long until South African will require additional capital in order to keep flying. You see this example of airlines who run deep into the red in many countries where the one national carrier is essential to the countries infrastructure. They go on and on while running heavy losses. Air India, Malaysia Airlines, Thai Airways, South African and of course the list goes on.