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South Africa wants national airline back in air in first half of 2021

After giving it a R10.5 billion bailout in the mid-term budget.
Image: Tod Burns

South Africa’s government said on Thursday it wanted its national airline flying again in the first half of next year, after giving it a R10.5 billion ($650 million) bailout in the mid-term budget.

The Department of Public Enterprises (DPE) said the latest cash injection meant a restructuring plan for state-owned South African Airways (SAA), which has been in a form of bankruptcy protection since December, can now go forward.

“The Business Rescue Plan for SAA is fundamental and will create a solid base for the emergence of a competitive, viable and sustainable national airline,” it said in a statement.

But aviation experts said the bulk of the new money is earmarked for repaying SAA’s creditors and the roughly R2 billion left over for restart costs would be quickly exhausted.

“It’s nowhere near enough to restart a recapitalised airline,” said Joachim Vermooten, an aviation economist who used to work at the DPE.

The airline could require around R18 billion in capital over the next five years, Vermooten estimated based on the scale of operations envisaged in SAA’s restructuring plan and the more than R6 billion of losses its administrators were predicting over the next three years.

SAA has not made a profit since 2011, draining scant public resources at a time of weak economic growth.

Linden Birns, another South African aviation industry veteran, said its future losses were likely to be greater than predicted by the administrators in June, as the outlook for air travel had since further deteriorated due to the pandemic.

It is also unclear where funding for SAA subsidiaries like low-cost airline Mango, maintenance division SAAT or catering arm Air Chefs will come from, as they are not covered by the R10.5 billion bailout, Birns added.

SAA’s restructuring plan has been on hold awaiting financing since July, when it was approved by creditors.

The DPE has said it is in discussions with potential investors and partners for SAA but has disclosed few details. Ethiopian Airlines is among those that have held talks with DPE.

SAA’s administrators said last month they were mothballing all operations until funding discussions were completed.

Prior to that, SAA had been operating repatriation and cargo flights after regular passenger flights were grounded when the government closed its borders in March to contain the pandemic.

A spokeswoman for SAA’s administrators declined to comment.

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“The DPE has said it is in discussions with potential investors and partners for SAA”

I don’t believe you.

End of comments.

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