South African Airways assures its operations continue “as normal”

Felix Lipov

Following reports of a worsening financial situation at South African Airways (SAA), including lack of cash for flight operations, the airline addressed the reports of impending bankruptcy, assuring customers and stakeholders that its flights are continuing to operate as normal.

“The airline is aware of media reports suggesting that it will cease operations. SAA is always committed to transparently communicate with all stakeholders, including customers, about any material or significant operational changes that may have an impact on flight schedules,” the airline issued an official press release on January 20, 2020.

In order for the airline to avoid collapse and ensure connectivity, the South African government placed the carrier under bankruptcy protection in December 2019, including a $272 million bailout to keep flights running. With not a single profitable year since 2011 and a bailout sum that amounts to $2 billion through the years, the airline was looking for a strategic partner to help it navigate through tough weather.

Despite its trials and tribulations, the government is determined to keep the airline running with the goal to reorganize the flag carrier into a “restructured, modern airline that is able to bring million more tourists and be a beacon of both business innovation and efficiency,” the Ministry of Public Enterprises of South Africa, the owner of South African Airways, stated on January 19, 2020.

The restructuring of the company is a move that demonstrates that the government would act accordingly to increase the cash flow into SAA’s budget so that the airline did not rely on public funds to keep running, continued the Ministry.

“The creation of a sustainable, competitive and efficient airline with a strategic equity partner remains the objective of government through this exercise.”

Missed deadlines

However, the National Treasury did not provide the required capital in order for the carrier to continue flying, reports Business live, a local media outlet. The deadline for South African Airways to come up with the funds necessary to continue flying was set on Sunday, January 19, 2020. The Ministry of Public Enterprises pledged to extend it.

With the restructuring, the national government via the National Treasury was supposed to provide $137.5 million (R2 billion) out of the $272 million (R4 billion) required for the post-commencement funds (PCF) that in turn are needed for the carrier to continue flights during the bankruptcy protection period.

“Following a meeting with the Practitioners at the weekend, the Department of Public Enterprises is engaging with the National Treasury to raise funds for the airline in line with the PCF undertaking,” stated the Public Enterprises authority.

Meanwhile, SAA is trying to raise cash by selling assets: there are two active tenders on the airline’s website, as the company tries to get rid of an “obsolete stock of Boeing 747 parts and consumables” and nine Airbus A340s, including 15 spare engines and four Auxiliary Power Units (APU). Currently, the Johannesburg-based airline owns 16 Airbus A340 planes and no Boeing 747s, according to data. Its last Boeing 747-400 departed from the carrier’s fleet in September 2011.

The former tender expires on January 22, while the latter does on January 31, 2020.


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