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South Africa in last-ditch move to save state airline

By Reuters | December 6th 2019

South Africa’s government will cede control of the national airline to a restructuring specialist in a last-ditch attempt to save the cash-strapped business from collapse.

As part of a rescue plan started yesterday, the government will hand the running of South African Airways (SAA) to an as-yet-unidentified specialist to make the sort of painful cuts that would be difficult for politicians to push through.

SAA has been granted a four billion rand (Sh28 billion) lifeline from the government and banks to launch the rescue plan, but that cash could only last for months, analysts say.

The airline has been on the brink of collapse since a crippling strike last month left it without enough money to pay salaries on time.

Then two major travel insurers stopped covering its tickets against the risk of the company becoming insolvent.

SAA employs around 5,000 people, while the wider SAA Group, which includes maintenance and catering divisions, employs around 10,000.

The airline, which has not made a profit since 2011 and has received more than 20 billion rands of government bailouts over the past three years, said it would publish a new provisional flight schedule soon.

Airport staff at Johannesburg’s OR Tambo airport said there had not been much disruption to SAA’s timetable so far, but many travelers were pessimistic about its prospects.

“I think SAA is doomed already... We shouldn’t be paying out of our own money. That money should be coming from somewhere else,” said Alicia Knoetze, 34, who was traveling to a motocross competition in Zimbabwe.

Others said having a national airline was a point of pride.

“We need something to boast about when we go to different countries. We need something that’s our own,” said Abulele Dlungele, 19, a university student returning to London for the end-of-year holidays.

Public Enterprises Minister Pravin Gordhan said the business rescue process was the best way to rebuild SAA into a stronger entity. He said the plan was to attract an equity partner later.

The Communist Party, a key ally of the governing African National Congress party, said it was disappointed with the government’s decision and wanted a “state-led turnaround process”.

Trade unions, also deeply suspicious of moves that could weaken the role of the state in the economy, said they were consulting members before commenting.

Under Thursday’s plan, it will be a business rescue practitioner, rather than the government as SAA’s shareholder, who will decide how the future of the airline should look.

Business rescue

SAA board member Martin Kingston told Reuters the airline would name the practitioner in the next few hours.

He said SAA had been days away from being shut down before the board decided on Wednesday to place the airline in a business rescue process, after a “massive erosion of confidence” related to last month’s strike.

The restructuring expert will aim to either return the airline to solvency or maximise value for its creditors.

Banks have promised to give SAA two billion rand of loans guaranteed by the government to launch the process, with the government providing a further two billion rand.

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