South Africa’s flag carrier South African Airways (SAA) is to receive a R1 billion ($53 million) bailout from the government in order to help the airline settle its outstanding arrears.
South Africa’s Finance Minister Enoch Godongwana announced that the capital allocation is part of the implementation of SAA’s 2020 Business Rescue Plan, according to a statement released by SAA.
Godongwana highlighted that the capital will be used to cover outstanding liabilities, particularly the final dividend payment to creditors and the refund of legacy un-flown tickets to affected passengers, dating back to the period when SAA was placed in business rescue in December 2019, the statement continued.
SAA’s Chief Executive Officer John Lamola commented on the news and SAA’s recovery since its exit from 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.
Fikile Mhlontlo, SAA’s Chief Financial Officer, emphasized that SAA is currently operating at breakeven and that the allocated capital is not meant to execute the airline’s business plan.
“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.”
SAA entered business rescue on December 6, 2019. Having undergone a restructuring of its business model, which saw the airline significantly reduce its debt and cut its workforce by approximately 80%, SAA exited business rescue on April 30, 2021. Soon after, the airline secured a new strategic equity partner, Takastso Consortium.
According to SAA, the R1 billion ($53 million) allocation is part of original R3.5 billion ($190 million) that was needed for SAA to settle 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.