Government has pledged its continued support for a national airline, despite concerns about the viability of South African Airways (SAA).
SAA was put into business rescue on 6 December 2019. In terms of the Companies Act, it was subsequently placed under the complete direction and control of Business Rescue Practitioners (BRPs).
In their plan published on Tuesday (16 June), the BRPs proposed government put up at least R26.7 billion to rescue the carrier after years of losses and the grounding of commercial passenger flights to contain the spread of coronavirus.
It also indicated that a number of substantial cuts will need to be made, including a drastic reduction of the workforce.
Responding to the plan, the Department of Public Enterprises said that the aviation industry in South Africa requires the capabilities of an SAA that is ‘reconstituted, restructured and reinvigorated’, without the legacy burdens, including corruption, poor leadership and unsustainable costs, which have beset the airline’s past.
“As the shareholder of SAA, government, taking into account the broader national interests, has made it clear that the desired outcome should be to establish a viable, sustainable national carrier that must emerge from the business rescue process.
“Particularly so as government if expected to marshal the resources necessary for this process from diverse sources,” it said.
“Through government guarantees, the BRP’s have had significant additional financial resources at their disposal to enable them to restructure SAA by stemming the tide of wastage, an excessive cost-structure and cash burn.
“We will assess the plan which, we are concerned, might have not been adequately accomplished.”
Government added that the BRPs had a substantial period of time and additional financial resources – R5.5 billion to augment the revenue of SAA – at their disposal.
In addition to this amount, further revenue was generated over the last six months, through repatriation flights and cargo flights for essential goods, it said.
SAA should be liquidated
The Democratic Alliance (DA) has rejected the latest proposed business rescue plan for SAA and called on finance minister Tito Mboweni to oppose it.
According to the DA, a total of R32.65 billion of government funds will be needed to carry out the plan.
“SAA has been bankrupt for the past decade, relying on bailout after bailout as a succession of poor CEOs squandered all hope of profit and goodwill with poor business practice,” Leit said.
“In no way, shape or form should the government be handing out R33 billion bailouts to a bankrupt black hole of an entity that has not contributed anything to our economy for ten years.”
The opposition party said the only realistic option for SAA at this point, is liquidation.