South Africa urges support for SAA rescue but allocates no new funds

But the lack of extra funding in Wednesday's supplementary budget - beyond the 16.4 billion rand set aside in February - makes the outlook for SAA highly uncertain. The DPE said on Tuesday it had received unsolicited proposals from private sector funders, private equity investors and partners about participating in a new airline based on SAA.

The South African government on Wednesday urged creditors to back a restructuring plan for South African Airways (SAA) but did not allocate new bailouts for the loss-making state airline in an emergency budget. Creditors are due to vote on the plan on Thursday, after a court application by private airline Airlink to block the vote failed.

The rescue package, published last week by SAA's administrators after months of delays and wrangling, proposed the government find at least 10 billion rand ($575.6 million) of new funds to pay some creditors, fund thousands of layoffs and restart the airline as COVID-19 travel restrictions ease. It also suggested scaling back the airline's fleet while keeping most of its routes and set a deadline of July 15 for the government to give a commitment on funding.

The Department of Public Enterprises (DPE), the ministry responsible for SAA, said it believed approval of the plan "would help creditors and employees to be co-creators of a new airline". But the lack of extra funding in Wednesday's supplementary budget - beyond the 16.4 billion rand set aside in February - makes the outlook for SAA highly uncertain.

The DPE said on Tuesday it had received unsolicited proposals from private sector funders, private equity investors, and partners about participating in a new airline based on SAA. But it has not named any of the potential investors, and some analysts are sceptical anyone would put cash into SAA without a government backstop given its longstanding frailties.

SAA has not made a profit since 2011 and has consumed more than 20 billion rand in bailouts in the last three years alone. DPE acting Director General Kgathatso Tlhakudi said on Wednesday it was not essential for the government to retain management control in a restructured SAA.

"If we find the right partner who is prepared to inject the technology and access to markets that we require for the airline, and they are seeking management control, we are quite comfortable to let go of that," he told local radio station 702. The DPE sent a voluntary severance package offer to trade unions on Tuesday, saying the restructuring could cost 3,620 jobs.

It said the offer, which includes one week of severance pay per year of service, one month of paid notice, and a potential top-up payment, was final and agreement was important to avoid liquidation. ($1 = 17.3732 rand) 

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