FILE PHOTO: A South African Airways (SAA) plane taxis after landing at O.R. Tambo International Airport in Johannesburg, South Africa, January 18, 2020. REUTERS/Rogan Ward
May 27, 2020
By Alexander Winning
JOHANNESBURG (Reuters) – South African Airways (SAA) can still be saved if it gets the necessary funding, the state-owned airline’s administrators said on Wednesday, adding they were talking to the government about a potential restructuring.
The comments in a letter to affected parties seen by Reuters mark a shift in tone from a recent appearance before a parliamentary committee, when the administrators said a wind-down of the business was a probable outcome.
SAA has been fighting for its survival since entering business rescue – a local form of bankruptcy protection – in December, after almost a decade of financial losses.
The government is still pressing for it to be rescued in some form, but its problems have been exacerbated by the coronavirus pandemic, which has pushed even once-profitable airlines across the world into financial distress.
In late March, SAA suspended all commercial passenger flights as the government imposed one of Africa’s strictest anti-coronavirus lockdowns. Last month, the government said it would not provide further funding, pushing the business to the brink of collapse.
“There is still a reasonable prospect of rescuing SAA, subject to the receipt of … requisite funding,” the letter read. “That will be set out in the business rescue plan to be published in due course.”
The administrators are still expected to push for a wind-down if more funding is not forthcoming.
A spokesman for the Department of Public Enterprises (DPE) did not have an immediate comment. A presentation by the National Treasury and DPE in parliament on Wednesday said various funding options were being considered.
In February the government said it had set aside 16.4 billion rand ($940 million) to pay SAA’s guaranteed debt and interest costs, and the presentation said officials would talk to lenders to try to spread maturities over the next three fiscal years, with the first payment at the end of July.
Earlier on Wednesday, the administrators had denied that SAA was aiming to resume flights in mid-June between Johannesburg and Cape Town, its only domestic route, rejecting a company statement from a day earlier.
They said they had not vetted the statement.
“The position around the cessation of flights remains as is until SAA has a better sense of what the level 3 lockdown means in terms of domestic air travel,” the administrators said, referring to President Cyril Ramaphosa’s loosening of COVID-19 restrictions, which included opening up domestic air travel for business purposes.
SAA’s roughly 5,000 employees have been on unpaid leave since the beginning of May, and the administrators have said the airline does not have enough cash to pay salaries.
Derek Mans, aviation organiser at the Solidarity trade union, said the only money employees can expect to receive this month is from the Unemployment Insurance Fund.
Officials have floated the idea of creating a new airline from the ashes of the old SAA, although aviation experts are sceptical given the stretched state of the public purse and the state of airlines everywhere.
Industry groups including the International Air Transport Association (IATA) on Wednesday urged the government to provide financial support to the aviation sector to mitigate the impact of COVID-19.
The IATA estimated revenues generated by airlines in South Africa would fall by $3 billion in 2020.
(Additional reporting by Olivia Kumwenda-Mtambo and Wendell Roelf; Editing by Joe Bavier, David Evans and Mark Potter)