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Wednesday, September 27, 2023

South African Airways is allocated R1 billion bailout to settle outstanding arrears

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South African Airlines (SAA), the nation’s flag carrier, will get an R1 billion ($53 million) bailout from the government to assist it to pay off its outstanding debts.

According to a statement issued by SAA, the cash allocation is a component of the implementation of SAA’s 2020 Business Recovery Plan, which was announced by South Africa’s Finance Minister Enoch Godongwana.

Godongwana emphasized that the funds will be used to pay off outstanding debts, including the last dividend payment to creditors and the return of legacy un-flew tickets to impacted customers, which date back to the time when SAA was put in financial rescue in December 2019.

SAA’s Chief Executive Officer John Lamola commented on the news and SAA’s recovery since its exit from a business rescue in April 2021.

“SAA’s operations have progressed positively since the airline emerged from business rescue, and as reported to Parliament earlier this month, SAA is no longer technically insolvent, a milestone which we reached a year earlier than projected,” Lamola said in the statement.

The Chief Financial Officer of SAA, Fikile Mhlontlo, highlighted that the airline is now breaking even and that the money allotted is not intended to carry out the business strategy.

“SAA has reached a point where we cover our operating costs,” Mhlontlo said.

He added, “it must be emphasized that the allocation announced relates only to historical debt. These funds are not meant to bolster the business plan we are currently executing.”

The business rescue for SAA began on December 6, 2019. SAA exited business rescue on April 30, 2021 after undergoing a reform of its business strategy that saw the airline drastically decrease its debt and shrink its staff by over 80%. Soon after, Takastso Consortium became a new strategic equity partner for the airline.

The R1 billion ($53 million) allocation, according to SAA, is a portion of the initial R3.5 billion ($190 million) that was required for SAA to pay off all debt that the airline’s Business Rescue practitioners had ‘ring-fenced’ into a Receivership.

“Due to the financial performance of SAA and the innovations of its management team, the total balance expected from National Treasury has been reduced to R2.586 billion ($140 million),” the airline’s statement said.

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