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UPDATE 2-South Africa's struggling SAA to enter business rescue

UPDATE 2-South Africa's struggling SAA to enter business rescue
Image Credit: Wikipedia

Failing state-owned airline South African Airways (SAA) will enter a business rescue process, a deputy minister and the parliamentary committee conducting oversight of the airline said on Wednesday. SAA, which has not made a profit since 2011 and is dependent on government bailouts to remain solvent, suffered a crippling strike last month that forced it to cancel hundreds of flights and pushed it to the brink of collapse.

The deputy minister, who asked not to be named because of the sensitivity of the subject, told Reuters he had received a letter from the secretary of the cabinet which said President Cyril Ramaphosa had called for a change of approach on SAA and instructed the government to put the airline in a "voluntary business rescue process". In a business rescue process, a specialist administrator takes control of a company with the aim of rehabilitating it to improve its chances of surviving or to secure a better return for creditors than they would get from a liquidation.

Parliament's Standing Committee on Public Accounts (SCOPA), which had been due to meet SAA on Thursday, said in a statement its chairperson had also been told about the plan. "The committee has been informed that this is the only viable route to avoid an uncontrolled implosion of the national airline. SCOPA is made to understand that an administrator will move in and the board will effectively not be in charge," the committee said in a statement.

State broadcaster SABC also reported that SAA would have to go into business rescue, citing a leaked letter. Ramaphosa's spokeswoman Khusela Diko did not respond to a request for comment, but she was cited by the Times Live news website as saying the letter was official correspondence to ministers and deputy ministers.

SAA spokesman Tlali Tlali could not be reached for comment. Public enterprises ministry spokesman Sam Mkokeli declined to comment. SAA lost more than 10 billion rand ($700 million) in the past two financial years, documents seen by Reuters showed this week.

Banks have refused to lend more money to SAA without new state loan guarantees. Finance Minister Tito Mboweni is trying to halt repeated bailouts to ailing state firms like SAA and has refused to sign off on new guarantees, however.

Some economists have welcomed the government's tougher stance on SAA, saying it could help avert another credit rating downgrade to "junk" status.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)



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