Financially challenged flag carrier of South Africa, South African Airways, has entered a “business rescue” version of bankruptcy protection under which the airline tries to reorganize.
South African Airlines employees were striking for several dates last month (read more here) trying to prevent inevitable redundancies that will now be facilitated under this “business rescue.”
Here’s an excerpt from FIN24 (access their piece here):
This decision was taken by its board, and supported by government, said Gordhan. This follows the leaking of a letter on Wednesday evening from President Cyril Ramaphosa to Cabinet, stating that the national airline must enter voluntary business rescue.
He added that SAA’s reliance of government finances must be reduced as soon as possible. But government will give SAA an additional R2 billion “a fiscally neutral manner” to help keep the airline operational.
And here from Mail&Guardian (access here):
The announcement was preceded by news late last week that travel agency Flight Centre had decided to stop selling SAA tickets because insurers, including Santam, refused to provide insolvency cover for the airline and thereby safeguard purchased tickets.
Ongoing financial strife saw the airline pay only half of all employees’ salaries last Wednesday; the balance was paid over the weekend.
Here’s an excerpt from the DailyMaverick (access their piece here):
SAA has been in financial and governance turmoil for years with critics of a series of government support efforts describing the national airliner as a vanity project. Amid a revolving door of executives and board directors, the airline since 2017 also received over R15-billion in bailouts, and a government pledge to pay another R9.2-billion in maturing loans over the next three years.
And here from Bloomberg (access their piece here):
SAA, which last made a profit in 2011 and has received 57 billion rand in bailouts since 1994, has been struggling to pay its bills after the National Treasury balked at providing it with more funding. Its finances took a further hit when staff staged a pay strike last month, grounding a number of flights and causing bookings to be canceled on a number of others.
And Financial Times (access their piece here):
Under South African law companies going into business rescue must show that they can secure finance to exit the process. Appointed practitioners will have to judge whether SAA can avoid liquidation. The government will provide a R4bn ($274m) bailout to SAA as it enters the business rescue process and the airline will have to honour debt guarantees of R19bn.
This is a messy situation. The government has already propped up the airline in the tune of 57 billion rand since the 1994 ($3.7B in today’s exchange rate), and it needs even more capital to continue operating.
Hopefully, this business rescue, bankruptcy protection, allows the airline to renegotiate its contracts with suppliers of which some, if not most, were likely not done on business terms under the previous president.