South African Airways' business rescue plan published

On the evening of Tuesday 16th June, the long awaited business rescue plan for South African Airways (SAA) was published.

A South African Airways Airbus A340. Photo by Andrew Pries | AeroNewsX

The document prepared by Siviwe Dongwana and Leslie Matuson of Matuson Associates indicates that the South African Government should put up R10 billion (approx. US$581 million), more than what they were ready to allocate to the airline in February, hence over R26 billion, even after years of losses at SAA, no publication of financial statements since 2017, and most recently a grounding of operations due to the ongoing global Coronavirus pandemic. The Public Enterprises Ministry said in a statement that it would assess the plan and that it wanted to see “a competitive, viable and sustainable national airline.”

The restructure indicates optimisation of the carrier in a few forms, starting with government consents and exemption as well as funding. This includes a working capital injection of around R2.8 billion, R2.2 billion for layoffs, R3 billion for unflown tickets, R600 million for general concurrent creditors and R1.7 billion for lessors. The administrators said that they would need the government’s support and a commitment on funding by July 15.

Management procedures must be implemented to efficiently manage the restructured SAA and employees are to be reduced. This is to be consented to by trade unions which could prove to be difficult. The airline would only need around 1,000 of its employees initially until August 2020 after which there could be a ramp-up.

Flying operations are to be optimised with only 6 aircraft to be in operation until August 2020, and upto 26 aircraft by January 2021. This ties in with route optimisation which entails cancellations of certain destinations, such as Hong Kong and Munich.

A projected income statement showed an outlook where SAA would make losses of more than R6 billion over the next three years a proposal that has not been received well particularly by South African political party Democratic Alliance (DA).

Alf Lees, DA Member of Parliament and member of the Standing Committee on Public Accounts, slammed the proposal which relied on massive government bailouts, saying:

“The Democratic Alliance categorically rejects the proposed business rescue plan by the South African Airways (SAA) Business Rescue Practitioners (BRPs), Les Matuson and Siviwe Dongwana, that relies on a R32.65 billion bailout from Government. The DA will write to the Minister of Finance, Tito Mboweni, to ask him to do what is right and oppose this ridiculous bailout.”