Home business finance Struggling SAA subsidiaries get R2.7bn funding lifeline

Struggling SAA subsidiaries get R2.7bn funding lifeline

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Treasury has tabled a Special Appropriation Bill to Parliament showing that it will make R2.7 billion available to SAA’s subsidiaries

A Mango Airlines plane. File picture: Karen Sandison/African News Agency (ANA)

STRUGGLING South African Airways’ (SAA) subsidiaries have been given a lifeline after the National Treasury announced that it would allocate them R2.7 billion in funding.

This will bring relief to SAA’s subsidiary Mango Airlines, which was contemplating placing itself under business rescue this month following a severe cash crunch at the low-cost carrier.

Last week, Mango flights were grounded for hours after Airports Company South Africa (Acsa) suspended it from using its airports countrywide due to outstanding debt.

Treasury yesterday tabled a Special Appropriation Bill to Parliament showing that it will avail R2.7bn to SAA’s subsidiaries.

The bill states that the appropriation for the subsidiaries “must be regarded as an appropriation, and expenditure for the 2020/21 financial year”.

Treasury said the funding would come from the R10.5bn allocated to SAA in the last financial year to implement its business rescue plan.

Ravesh Rajlal, the chief director of state-owned enterprises at the Treasury, said SAA had received close to R50bn since 2008 from the government in the form of guarantees.

Rajlal said the allocations made to SAA subsidiaries might change due to the expected restructuring of the airline when the interim board takes over.

“If more funding beyond the R819 million is required for Mango, then that amount will have to be looked into from the existing R2.7bn,” Rajlal said.

SAA has so far received R7.8bn of the required R10.5bn funding for the implementation of the plan, and last week it exited business rescue after the process was completed.

Treasury said the Department of Public Enterprises had requested that a mechanism be found to transfer a portion of the business rescue funding to SAA’s subsidiaries.

It said SAA Technical (SAAT) will receive R1.663bn, Mango would be allocated R819m, while Air Chefs would receive R218m.

SAAT and Air Chefs were unable to pay full salaries to their staff during the hard lockdown in 2020, as SAA’s business rescuers were not legally mandated to spend the airline’s post-commencement finance to assist the subsidiaries.

SAAT staff have only received between 25 percent and 50 percent of their salaries every month for the past year, and last week the company initiated talks to enter a retrenchment process.

BUSINESS REPORT