SAA needs a government loan guarantee to avoid going under

South African Airways board member and chairperson of the Board Implementation Committee, Martin Kingston, says that the airline will need a government loan guarantee to avoid liquidation.

Speaking in an SABC News interview on Wednesday (20 November), Kingston said that these financial issues mean that the industrial action must stop immediately if the national carrier is to be salvaged.

“At the moment, Rome is burning. We don’t have the time or the luxury to consider industrial action. This strike is actually pushing us over the precipice rather than helping salvage the airline.

“Unless we are able to secure guarantees from national treasury – and we’re in discussions with them as you and I speak – then the board will have to recommend to government that actually it be placed in liquidation.

He added that the country’s banks will not offer any more credit until the government provides this guarantee.

“We need to be confident that we have the financial wherewithal to trade for the next 12 months on a solvent basis. That is not currently the case.”

Government not budging

Government has ruled out an intervention in the ongoing battle between the struggling state airline and unions leading a strike, with Public Enterprises Minister Pravin Gordhan refusing to step in to fund wage demands.

In an emailed statement to Bloomberg, Gordhan said that the state has already given South African Airways more than R20.5 billion ($1.4 billion) over the past three years.

The country is facing severe fiscal constraints and no more aid can be made available, he said.

“The pattern of bailouts has become a moral hazard,” said Gordhan, who met with the unions in Pretoria.

“A restructuring of SAA’s business is required to return the airline to profitability. In addition to growing revenues, efficiencies must be improved and costs will need to be reduced across the board.”

Read: SAA says it’s on the road to recovery

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SAA needs a government loan guarantee to avoid going under