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Airline dumps local routes

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SA Express has struggled to stay afloat as it has depleted its working capital, with most lenders reluctant to give it a loan on the grounds of its weak balance sheet

File photo: Nicholas Rama (ANA).

STATE-owned medium- to short-distance carrier SA Express has dumped local routes to focus on continental destinations as stiff competition in the market and crippling debt saw its flights grounded last week.

The group said it had decided to leave the local routes due to stiff competition from low-cost airlines.

It said it had asked the government for a R300 million short-term financial boost to run its operations until it implemented its turnaround strategy.

It said the strategy, which has already cost it more than R1.2 billion in historical debt, would include the downsizing of its staff complement.

“The R1.2bn helped to resolve solvency issues, but not operational capital, what we are expecting as shareholder support will be sufficient for the short term while we implement our strategy,” interim chief executive Siza Mzimela said.

SA Express has struggled to stay afloat as it has depleted its working capital, with most lenders reluctant to give it a loan on the grounds of its weak balance sheet.

The government has also shown reluctance in extending further guarantees.

Last year the South African Civil Aviation Authority suspended its certificates of airworthiness for nine of the 21 aircraft operated by the airline, with the watchdog citing non-compliance in relation to 17 specific findings.

On Thursday last week a full complement of executives told the media that the airline had a clean bill of health after negotiating terms with key creditors, including Airports Company South Africa, which is owed more than R71 million.

It said what it needed now was a short-term cash injection for operational expenses.

Mzimela conceded that SA Express was ready to be integrated into the structure proposed by the departments of Enterprises and Treasury as part of a turnaround plan for transport state-owned enterprises.

Mzimela said SA Express was now finalising the process of rightsizing its operations.