No more bailouts for SAA

There will be no more bailouts for SAA, so a soon-to-be-announced strategic equity partner will help the state airline get back its wings.

The spokesperson for the department of public enterprises, Richard Mantu, would not be drawn on details of the partner, which will provide the restructured airline with much-needed capital, but reiterated that an announcement will be made within weeks.

He noted that the government had indicated there would be no further funding for SAA, “hence the reason for engaging with strategic equity partners to provide further funding for the operations of the new airline”.

According to a 2020 treasury document, SAA has incurred net losses of more than R32-billion since 2008. By the Mail & Guardian’s calculations, with the R10.5-billion bailout allocated to SAA last year, the airline has received more than R60-billion in government guarantees.

In March, Public Enterprises Minister Pravin Gordhan told parliament that several potential partners had indicated their interest in 2020, but Covid-19’s effect on the aviation industry had changed this. Whether SAA would be making a profit in the future largely depended on the future shareholder, Gordhan said.

Business rescue practitioner Siviwe Dongwana echoed Gordhan’s sentiments.

Earlier this week, the department said in a statement that the government was in the final stages of negotiations with the preferred partner and that a purchase and sale agreement should be concluded soon.

The department’s statement followed the announcement that, after almost 18 months, the business rescue of SAA had been finalised. 

The business rescue cost taxpayers about R243-million, according to figures from the department. SAA was put under administration in December 2019 but the business rescue plan was only approved by creditors six months later.

In a statement last Friday, the business rescue practitioners said the airline was now both solvent and liquid. 

According to the business rescuers, a significant portion of the debt that hamstrung SAA has since been compromised. The balance of the debt has been transferred to a receivership, which will pay out the money to creditors over the next three years.

In the meantime, SAA’s interim board and management will be developing and implementing a short-term business plan to sustain the operations.

R2-billion of SAA’s R10.5-billion government bailout has been allocated towards working capital. A portion of this amount has been used to cover care and maintenance costs. The rest will be used to restart SAA’s operations.

A March update by the business rescue practitioners said the new airline has been left with 1000 workers, down from 4700. Almost 400 pilots did not take voluntary severance packages and may lose their jobs.

Meanwhile, on Tuesday, the treasury tabled the Special Appropriation Bill to parliament, which outlined the reprioritisation of R2.7-billion for SAA’s subsidiaries.

This is after Mango, SAA’s low-cost carrier, was grounded last Wednesday. Airports Company South Africa stopped flights because of outstanding payments, but later lifted the suspensions when the airline paid back a portion of its debt.

R2.7-billion of SAA’s R10.5-billion bailout was allocated to the recapitalisation of SAA’s subsidiaries, including Mango, in-flight catering service Air Chefs and SAA Technical. 

Mango has been allocated R8.2-million. Last week, Mango spokesperson Benediction Zubane said he could not disclose how much Mango owes to its creditors, but said: “It’s huge.”

Most of the R2.7-billion will go to SAA Technical, which has been allocated R1.6-billion. The aircraft maintenance service is planning to start a retrenchment process, which could see more than 1 000 jobs cut.

But SAA’s subsidiaries will have to wait for the parliamentary process to conclude before they get their portions of the R2.7-billion.

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Sarah Smit
Sarah Smit
Sarah Smit is a general news reporter at the Mail & Guardian. She covers topics relating to labour, corruption and the law.

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