SAA could face liquidation as state funding dries up

Grounding of flights due to Covid-19 has compounded financial woes at the state carrier.
Image: Shutterstock

South African Airways has been denied any further funding by its government owner as the national carrier looks for ways to recover from the coronavirus crisis and a local form of bankruptcy protection.

The airline’s administrators, who were put in charge in December, were told by the state to instead source cash from available resources, according to a letter they sent to affected parties and to Bloomberg News dated April 14.

“We are currently assessing the impact of this development on the business-rescue process and will communicate any decisions to be made,” they said in the letter.

South African Airways, which began operations in 1934, has racked up R26 billion in losses over the last six years and has depended on a series of state bailouts to keep operating. The grounding of all of its passenger flights, aside from charters to repatriate stranded citizens, due to the coronavirus lockdown have further decimated its revenue stream.

Read: Treasury ups the ante on its economic policy response

Finance Minister Tito Mboweni has long advocated shutting off funding for the airline, and earlier Tuesday cited the carrier’s closure as a way to save funds as the country deals with the fallout of the coronavirus pandemic. Even before the Covid-19 outbreak ground global travel to a halt, the administrators had cut routes and started consultations with more than 4 700 employees about job losses.

“All options are now blocked to any form of real continuation of the airline,” said Peter Attard Montalto, head of capital markets research at Intellidex. “Basically the only option now is liquidation.”

The development is a blow to the ambitions of Public Enterprises Minister Pravin Gordhan, who has been keen to keep the airline running to both preserve jobs and act as a flagship carrier for the country. However, he told the business-rescue practitioners that the virus had strained the government’s finances and he couldn’t accede to their request to extend foreign borrowing limits by 10 billion rand, according to a second letter seen by Bloomberg News.

SAA’s external debt is guaranteed by the state in the event of the carrier’s collapse.

“We are of the firm conviction that South Africa needs a viable and sustainable set of airlines,” the Department of Public Enterprises, which falls under Gordhan, said in a statement. “We must urgently determine the operating and business model for a rescued airline, with a sustainable financial model.”

© 2020 Bloomberg

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liquidate and be done. One parasite less.

hope its not the normal…”NO”…and then a week later…here is your R10bn..if true the liquidation might now be the only choice.

SAA: THERE.IS.NO.MORE.MONEY.
BRPs: THERE.IS.NO.MORE.MONEY.
Got it? Shut the doors. Walk away.
Finish and klaar.

What you have forgotten is that once liquidated all the existing Govt Guaranteed Loans become payable , so WHoooosh there goes a whole lot more
money ex treasury .

Agree hang the new A350 keys in the rack, don’t bother with the lights the municipality will cut you off.

BRP need to collect fees before making the obvious decision.

Pravin and his boss should be locked up for this. Take the business rescue practitioners with.

They have been wasting billions on this for years now.

What kind of rescue is it when you keep getting bail outs from Government??????

TSKKKKK!!!!!!!

And the prior management walk away laughing?

Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye
Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye
Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye
Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye
Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye
Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye, Bye Bye.Thank you for flying South African airways

Trillions of rands of taxpayers money have been wasted, for what????
If your horse’s leg is broken, you shoot it.
This horse’s legs are broken, shoot this horse, get it over and done with, spend that money elsewhere
(like Eskom?, ya right.)

Pravin Gordhan = 1950’s true type communist who believes the state must be in everything and control every aspect of our our lives.

true…but for now so does the capitalists…just see how the US Fed is buying assets…US being nationalised by them.

The difference is that Communism already died in 1989, forever assigned to the scrap yard as “Mankind’s worst blunder”.

@jnrb: you are so right. I have a list of 31 FORMER Communist states, and a 2nd list of over 50 FORMER MULTI PARTY STATES WITH GOVERNING COMMUNIST PARTIES. (Available on Google.) All failed. Commie party kicked out of leadership. Yet, here in SA, we STILL have a Communist Party. Why??? Do people not understand history – that Communism has destroyed countries wherever it has been? Yet they think it can still work here – an utter denial of historical proof. Delusion that amounts to demonic levels.

About time! What an incredible waste of money this project has been and they are still asking for bailouts. There is no way that the bailout requests would stop but to what end?? Just imagine what use could have been made of the billions of Rands gone down the drain with SAA and how that money could have been spent on Health, Education, Infrastructure and alleviation of poverty. I will never understand why there was this determination to continue to pump our scarce resources into an entity which adds no value to the people of South Africa!!

To line pockets what’s hard to understand???

smuggling weapons?

The massive losses will never be recovered and bail outs are lost.
SAA has been in constant turnaround mode almost for 10 years. The absolute waste under Vuyani cost billions. The business rescuers have done no better but have reduced the losses due to route close down. Fundamentally nothing has changed. Why DPE believes any new action now will change anything is beyond belief.
The real tragedy will be to liquidate SAA and let those who looted it go with impunity. There are many cases underway and others lined up. National Treasury should take over the Forensic Investigations and catch the crooks.

Is it a plane, is it a bird? No, it’s a vulture circling over O.R.Thambo!

Billions in bailouts for useless SAA.
Begging bowl for bailout of SA.

It’s perfect time to liquidate useless SOEs.

“We are of the firm conviction……..” One must say, and give credit where it is due, these Gordhan type of people have a lovely way with words. They can give very clever answers without saying anything meaningful.

SAA will always be a flagship of the country because it symbolises the ANC – morally, intellectually and effectively bankrupt. The rating agencies confirmed it.

SAA is the first domino to fall. There are many SOEs and municipalities that will follow. Luthuli House will be the last domino to fall, and that is a pity. If it fell first, the rest would still be standing.

Is there a number yet on what liquidating is going to cost taxpayers incrementally to the historic? In normal liquidation creditors take a haircut and shareholders get nothing. Here, the shareholder will have to pay in : not only for the guaranteed debt but also for the political fallout

Morally totally unacceptable to fund them a day longer. People are dying of hunger, 60/day dying of TB, no service delivery etc – great advertisement for the socialists. Leave Gordhan and his buddies as far away as possible

Too much ANClooting for too long and too many good heard earned tax payer’s rands spent bailing this train out year after year.

Stop the ANCinsanity.

Can u call shotgun on the statue at OR tambo?

Just wait and see …. in a few months, a new airline, GuptaAir, will emerge promising everything to everyone and supported by ANC ministers to provide “our people” with state of the art, air transport.

End of comments.

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