The South African government is ready to inject more cash into South African Airways, a leaked draft plan revealed. $1.8 billion could be allocated as part of a “final” restructuring plan.
South Africa’s opposition party, objecting to this new cash injection, leaked the draft stimulus plan in which the state plans to clear the company’s debts to its creditors and inject an additional $930 million to kickstart the airline after the COVID-19 coronavirus crisis.
The project would also halve the workforce to around 2,500 employees and reduce the fleet to twenty aircraft. Nonetheless, it still expects to see the airline lose $1 billion during the next three years. SAA, which has recorded no profit since 2011, is heavily indebted and only survived thanks to regular cash injections from the state. Over the past three years, more than $1.1 billion have been injected into the company.
The leak shows a U-turn in the government’s position. In April 2020, the administrators, who had been appointed in late 2019 when the company had been placed under bankruptcy protection, announced that the government refused to inject any more cash in the company.
It also contradicts previous information from the government. On May 1, 2020, the ministry of public enterprises announced that the national carrier would disappear to give way to a new airline. “Stakeholders have agreed on a long-term vision and strategy” with a view to “the creation of a new dynamic airline,” public enterprises minister Pravin Gordhan commented at the time, predicting “the beginning of a new journey”.
The Joint SAA Business Rescue Practitioners (BRPs) reacted to the leak, stating that the draft plan was only “for discussion purposes” thus refusing to comment further on it. After a request for an extension of the deadline was made by administrators, the final proposal could come around June 8, 2020. “The extension will not stop the practitioners from continuing to take the necessary steps to progress SAA’s business rescue and will continue to take proactive steps to conserve cash and protect the interests of SAA,” the BRPs concluded.