South African Airways Bailout Plans Emerge From Private Investors
South African Airways Bailout Plans Emerge From Private Investors
South Africa has received proposals from private investors and potential airline partners interested in taking part in the restructuring of the national carrier, which has been in bankruptcy protection for six months.
The government will examine any credible approach that will help South African Airways emerge from the ongoing global aviation crisis as a viable company with no financial or operational issues, the Department of Public Enterprises said in a statement on Tuesday. The state didn’t name any of the interested parties.
The announcement comes two days before creditors are due to vote on a rescue plan by administrators that proposes a bailout of at least 26.7 billion-rand ($1.5 billion) for the loss-making carrier. That includes funds to pay lenders and to reduce the workforce by almost 80% to about 1,000 people. The South African government hasn’t said explicitly whether it supports the proposals.
The business-rescue team, led by Siviwe Dongwana and Les Matuson, declined to comment. According to their plan, two parties were interested in becoming SAA strategic investment partners before the Covid-19 crisis all but grounded airlines worldwide, while a third had proposed an aviation alliance. Those talks may be revived “once the global aviation industry is back on its feet,” according to the document.
Ethiopian Airlines Group, Africa’s biggest carrier, said last month it is prepared to come to the rescue of stricken carriers around Africa, though Chief Executive Officer Tewolde GebreMariam said at the time no negotiations had taken place with SAA. A spokesman for the Addis Ababa-based airline didn’t immediately comment on Tuesday.
Global airlines have been plunged into crisis due to travel bans to contain the coronavirus pandemic, with many seeking multibillion dollar bailouts. The International Air Transport Association has predicted carriers will lose a combined $84 billion this year and almost $16 billion in 2021, more than three times that which followed the 2008 global economic slump.
The South African government is having to tread a fine line between its desire for a viable national airline and the need to provide the latest in a long line of unpopular bailouts. Finance Minister Tito Mboweni, a vocal opponent of providing support to SAA, is due to present a revised annual budget on Wednesday that will need to provide more resources to the nation’s coronavirus relief efforts.
The rescue proposal is being challenged by SA Airlink, a South African domestic airline, which says it’s owed 700 million rand by SAA in unpaid ticket revenue and wants the state carrier liquidated. The Johannesburg High Court is due to hear that case on Wednesday. Airlink is among a long list of suppliers owed about 38.4 billion rand.
Two major labor groups, the National Union of Metalworkers of South Africa and the South African Cabin Crew Association, last week reacted furiously to the proposal for about 3,700 job cuts and have said they are considering their legal options.
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