SAA to receive R2 billion lifeline
The airline's creditors will also provide an additional R2 billion as it begins the journey to restructuring its business and financial affairs from Thursday.
JOHANNESBURG –South African Airways (SAA) will get a R2 billion lifeline from National Treasury in post business rescue commencement funds.
Public Enterprises Minister Pravin Gordhan made the announcement in a statement early on Thursday morning.
The airline's creditors will also provide an additional R2 billion as it begins the journey to restructure its business and financial affairs from Thursday.
Gordhan emphasised that the money was not a bailout, but will help in restructuring the cash-strapped flight operator.
He said placing SAA under business rescue was the 'optimal mechanism' to restore confidence in the company.
Attorney specialising in debt recovery, business rescue and insolvency Gareth Cremen said the recent crippling strike at SAA was not to blame for its financial woes.
“Surely, when you look at SAA as a whole, you have to stop and ask yourself when you keep receiving bailouts, at what point in time is the board of directors trading recklessly and is this not a decision for SAA to have considered business rescue far sooner? So, the test which one is to consider in the business rescue is, can you pay your debts as and when they fall due and payable in the ensuing six months.”
This after President Cyril Ramaphosa on Wednesday ordered that the cash-strapped airline go into voluntary business rescue, saying that was the only viable option to save it from implosion.
It emerged on Wednesday night that Ramaphosa informed his Cabinet to change its approach in addressing the dire situation at SAA, saying restructuring the airline would not help.
In a leaked letter, seen by Eyewitness News, the director general in the Presidency and Secretary of the Cabinet, Dr Cassius Lubisi, informs Cabinet members and deputy ministers about the president's decision.
Presidency spokesperson Khusela Diko has confirmed the authenticity of the leaked correspondence.
SAA is insolvent and doesn’t have money to fund operations in future.
The airline is still trying to recover from a week-long strike, which cost it over R50 million daily. Also, it’s battled to guarantee the payment of salaries and travel group Flight Centre recently cut ties with it.
Ramaphosa said Cabinet’s approach to restructuring the airline would not work and the overall position needed to change in order to save the airline.
He said placing SAA under voluntary business rescue was the only viable route to avoid the uncontrolled implosion of the airline.
The president also believed this action would prevent the liquidation application by lenders which could worsen the airline’s situation.
A business rescue practitioner will now have to be appointed and once the administrator moves in, the board stops being in charge.
There have been warnings this could have staggering implications as the practitioner will have comprehensive and unfettered power to do whatever it takes to rescue the airline.