South African Airways’ administrators proposed the 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.
The state-owned airline was placed into business rescue in December, and the rescue team led by Siviwe Dongwana and Les Matuson have asked for repeated extensions to the publication of a rescue plan. The document was posted on their website on Tuesday, and will now be reviewed by the government before a vote by creditors.
The state will need to support the airline “during the post ramp-up period until it is profitable and self-sustaining”, according to the rescue plan. SAA has been loss-making for almost a decade and has required repeated government bailouts and debt guarantees to remain in operation.
The funding proposal is about R10-billion more than the government was prepared to allocate to SAA in its annual budget in February, when it set aside R16.4-billion. Finance minister Tito Mboweni is scheduled to deliver a revised annual budget on 24 June that will need to provide more resources to the nation’s coronavirus relief efforts.
“We will assess the plan which, we are concerned, might have not been adequately accomplished,” the department of public enterprises said in a statement.
The administrators say R2.8-billion is needed to get SAA flying again after months of near inactivity amid the Covid-19 pandemic, alongside R2.2-billion to cut the workforce to 1 000 employees from about 4 800. The rescue team earlier proposed the firing of all staff, but public enterprises minister Pravin Gordhan and labour groups intervened to curtail that plan.
State funding will be required to pay off lenders, including the R16.4-billion allocated in the February budget plus R600-million for dividends for concurrent creditors. About R3-billion is needed for ticket refunds and R1.7-billion for plane-leasing companies.
Airlines around the world have been left prone by the coronavirus pandemic, which has brought almost all air travel to a halt and is expected to lead to industry losses of US$84-billion this year alone. SAA was vulnerable even before the crisis, as years of mismanagement and allegations of corruption eroded the carrier’s finances.
Former SAA chairwoman Dudu Myeni was banned from holding directorships for life last month and ordered to pay legal costs after a court found her responsible for financial missteps at the carrier over several years. — Reported by John Bowker and Paul Vecchiatto, (c) 2020 Bloomberg LP