SAA nears debt agreement with lenders

South African Airways is moving closer to an agreement with lenders to extend R9.2 billion rand ($642 million) of debt, a deal that would buy the unprofitable state airline more time to restore its battered finances.

An agreement has been reached “in principle” to roll over the borrowings, “but of course there are certain conditions that need to come through,” CEO Vuyani Jarana said at the CAPA aviation conference in Dubai on Tuesday. “It’s an ongoing conversation.”

An agreement with lenders would ease SAA’s dependence on the National Treasury, which allocated R5 billion to the carrier last year to help it meet debt payments.

Finance Minister Tito Mboweni has made clear the government is reluctant to approve a further outlay, saying in November he favours shutting down the company. Eskom Holdings SOC Ltd, another state entity, was in February granted a record R69 billion bailout to be paid over three years.

Jarana was hired in late 2017 to lead a turnaround of SAA after years of mismanagement and corruption scandals.

One of his plans is to transfer four unwanted Boeing SA aircraft from the main airline to low-cost carrier Mango, which has the scope to increase capacity, he said.

“There’s more growth in the low-cost services in the domestic market, which makes Mango very critical for SAA,” he said.

SAA is also looking to hire an adviser to help sell the state-owned airline’s catering business, Jarana said, a move that would raise capital and rid the carrier of less important assets.

Read: SAA warns of new restrictions for South Africans travelling to the US

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SAA nears debt agreement with lenders