The government has warned the loss-making South African Airways (SAA) that it will not bankroll the state-owned airline indefinitely, Business Day reported on Wednesday.
In a confidential letter to SAA chairperson Jakes Gerwel, Public Enterprises Minister Alec Erwin wrote that SAA ”cannot and will not be supported at all costs”.
The warning came a day after the government announced a R3,1-billion guarantee to SAA as the first tranche of a recapitalisation process.
SAA was looking for about R4-billion in new capital, promising to use the money to radically restructure the airline and restore it to profitability. SAA was expected to report losses of more than R650-million for last year.
The paper said the restructuring was likely to involve the unbundling of some of SAA’s businesses, such as its cargo, catering and maintenance operations. It also said that international routes would probably be cut.
Erwin’s letter went on to say that ”it is imperative that these funds are not applied to any recurrent expenditure as this will place the airline in a serious position and will jeopardise further support. The funds must be used to build up our reserves and in carefully considered circumstances for capital expenditure that will strengthen the airline”. – Sapa