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SAA gets more bailouts from government

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R4.6 billion new money could be needed to revive the airline.

JOHANNESBURG – The South African
government has agreed to more bailouts for South African Airways
(SAA), reversing its previous stance, a draft rescue plan
showed, with the airline’s administrators saying 4.6 billion
rand ($263.44 million) of new money could be needed.

After almost a decade of losses, state-owned SAA entered
business rescue – a local form of bankruptcy protection – in
December.

Its fortunes deteriorated when the COVID-19 pandemic forced
it to halt all commercial passenger flights in March, and in
April the government said it would not provide further funding
for rescue efforts.

But a draft business rescue plan for the airline, made
public by the biggest opposition party the Democratic Alliance,
showed the government had changed its stance by agreeing to fund
a proposed restructuring.

A spokeswoman for the administrators confirmed the document
was genuine, but said: “It is for discussion purposes only, and
we await comment from the affected persons.”

A spokesman for the Department of Public Enterprises could
not immediately comment.

The draft, seen by Reuters, said the government had agreed
to make a working capital injection, of which the administrators
estimated at least 2 billion rand would be needed, and fund
employee layoffs, which could cost up to 2 billion rand.

The government would also make an allocation of at least 600
million rand towards repaying some creditors.

That is on top of 16.4 billion rand the government set aside
in February to repay SAA’s guaranteed debt and cover
debt-service costs.

The draft plan proposed halving the airline’s staff to
around 2,500 and also halving its number of aircraft to around
20 in the coming years.

The administrators said that prior to COVID-19, they had
been speaking to three parties potentially interested in
partnering with SAA as a strategic equity partner or by forming
an alliance agreement.

“All these engagements took place pre-COVID-19, and would be
revived once the aviation industry is back on its feet,” they
were quoted in the plan as saying.

SAA has received more than 20 billion rand in bailouts in
the last three years, stretching public finances at a time of
weak economic growth.

A draft rescue plan from early May showed the administrators
then recommended winding down the airline in the absence of
additional government funding.

But officials have since stepped up pressure on the
administrators to come up with a plan to salvage SAA.

REUTERS