SA Express threatens to ground flights amid cash crunch

The department of public enterprises is not happy.
The Department of Public Enterprises says BRPs presented a subpar stabilisation plan. Image: Moneyweb

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. 

Read: SA Express to appeal business rescue judgement

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

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Post-commencement funding – is that a more political correct word for bailout money?
Please forgive for asking, my English are not so good.

You cannot give CPR to the deceased.

Seems the proto-Marxists seem to battle with the concept of what a BRP does. Messrs Mkhombo and Terblanche clearly know what they are doing, hence euthanizing a terminally ill animal but the cadres would like to keep it going, with not-their-money

Government interference again. So much for BRP.

If they halt flights it will be the second time in just a few months. Already the public have no confidence in this excuse for an airline. SAX will never recover from a second grounding of the Company.

“The department makes no mention of what was missing in the BRPs’ plan, only stating that it did not include key commercial elements.”

It was government’s inability to run the airline along commercial lines that got us to this point. Why should we now give any credence to government’s opinions on “key commercial elements”?

This BR process is a farce, a pair of velvet gloves for the government’s trotters. IMO, it’s time the creditors asked a court to wind up this open drain and distribute whatever cents in the Rand still exist, if any.

Whenever the lack of coherent and logical reasoning by ANC cadres and employees frustrate the hell out of me, I calmly remind myself that it is impossible to enter into a coherent and meaningful conversation with individuals who did not have maths in matric.

This problem of gross incompetence and stupidity started at school already. No amount of bailout money or business rescue practitioners can mitigate the lack of intellectual capacity. The balance sheet of SOEs resembles the intellectual capacity of the shareholder, which is less than zero on a good day.

End of comments.

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