The Department of Public Enterprises says the government has expressed concern over plans to halt SA Express flights, after business rescue practitioners (BRP) presented “wholly inadequate” plan to turn the airline around.
In a statement released on Friday, the department said the BRPs had taken the decision to “‘ground’ the airline without first presenting the shareholder and stakeholders with a comprehensive and feasible business case for the immediate stabilisation of the airline”.
SA Express was placed under business rescue by the High Court in Johannesburg at the start of February, with Phahlani Mkhombo and Daniel Terblanche appointed as the airline’s BRPs.
Mkhombo and Terblanche presented the airline’s business case to the department’s acting director-general, Kgathatso Tlhakudi and the Aviation Division this week, however they were told to go back to the drawing board and draft a plan which the department can take to National Treasury, in order to lobby for post-commencement funding (PCF).
“The department has impressed upon the business rescue practitioners that the fiscus is constrained, and notwithstanding the NT [National Treasury] is fully engaged on the matter and understands the severity of the situation,” it said.
“In this regard, if a strategic equity partner could be interested in investing in the airline, this option should be vigorously pursued”.
The department makes no mention of what was missing in the BRPs’ plan, only stating that it did not include key commercial elements. The practitioners have been told to engage with labour, management and technical staff at SA Express, to come up with a credible business case that includes the airline’s restructuring options, implications for fleet, routes, existing assets including repairs, staff, regulations and costs, a new financial model, funding options and branding recovery plan.
What has also not been disclosed is the amount that the BRPs will need for the process, but Daily Maverick has reported that the BRPs warned government that the airline has no money and needs a cash injection in order to pay salaries beyond February.
The insolvent airline was allocated R200 million in the 2020 national budget, while SAA, which is also undergoing business rescue, received R16.4 billion.
Finance Minister Tito Mboweni has previously said that the feeder airline should be sold off and used as a case study for privatisation.
The department said that it’s aware that the practitioners need funds and has advised them that it will engage Treasury to seek the money either through a government guarantee or bailout – a meeting on this will be held on Friday (today).
“The Department is of the view that there is still a rationale for SA Express to play a critical role as a feeder airline to service secondary routes and key cities in the Southern African Region, however, the BRPs with board and management need to firm up the commercial case to enable funders to provide PCF,” it ended