South Africa Approves State Airline’s Going-Concern Guarantee

(Bloomberg) -- South Africa’s National Treasury approved a request from the nation’s airline for a going-concern guarantee which the unprofitable company needs to finalize its annual financial statements.

South African Airways, which has been surviving on about 14 billion rand ($969 million) of government debt guarantees, last posted a full-year profit in 2011 and has yet to finalize its financial statements for the year through March 2015. Instability at the airline has accelerated in the past year as a raft of senior management departed and the airline was embroiled in controversial deals ranging from the attempt of Chairwoman Dudu Myeni to renege on a leasing contract with Airbus Group SE, to the appointment of a little-known financial adviser to source funding on its behalf. Both moves were later reversed while Myeni was last week reappointed for a year.

“It will not be ‘business as usual’ for the airline, which is currently going through serious challenges including governance and financial difficulties,” the Ministry of Finance said in an e-mailed statement on Friday after a meeting with the carrier’s board. “The primary focus is to return the airline to financial sustainability.”

The Treasury attached conditions to approving the guarantee, including the implementation of cost-cutting initiatives and to start a new process of appointing a chief executive officer, a chief financial officer and other key executives.