South African Airways has been given more bailout money from government as the beleaguered airline hobbles through a restructuring process that is rapidly burning through the R5.5 billion that the airline has been allocated over the past two months.
National Treasury has budgeted an additional R16.4 billion over the next three years to cover the airline’s guaranteed debt and debt servicing costs.
The new lifeline will be distributed in amounts of R10.3 billion, R4.3 billion and R1.6 billion from the beginning of the 2020/2021 financial year, through to 2022/2023.
Speaking to journalists ahead of his presentation Finance Minister Tito Mboweni said he would not express his views on the airline beyond, “the SAA sword of Damocles has now fallen on us”.
That’s not all
“It is the very sincere hope of many that this intervention will lead to a sustainable airline that is not a burden on the fiscus,” Mboweni added.
SAA is the first public entity to be placed under business rescue. Since the decision was taken in December the business rescue practitioners (BRPs) have experienced some turbulence as they work to restructure the airline’s operations and formulate a business rescue plan.
Recent decisions to cancel routes, particularly the resolution to cut all domestic routes leaving SAA with one limited route to Cape Town have triggered negative reactions from various stakeholders including President Cyril Ramaphosa.
The costs of the initial restructuring were expected to be around R4 billion, with R2 billion raised through Treasury-guaranteed loans from private funders and the rest provided by the state in a fiscally-neutral manner. But delays in government meeting its side of the bargain saw the costs increase to R5.5 billion with Treasury eventually managing to obtain R3.5 billion from the Development Bank of Southern Africa.
The business rescue practitioners are expected to deliver their plan “within a matter of weeks”.
“Government anticipates that additional funding will be required to cover restructuring costs in line with the business rescue plan,” Treasury stated in the 2020 budget review.