South African Airways is in talks with lenders including Standard Bank Group and Investec about funds to alleviate a cash crunch brought on by persistent losses and a week-long strike, according to people familiar with the matter.
Negotiations are also taking place with Absa Group, Nedbank Group and FirstRand’s Rand Merchant Bank, said the two people who asked not to be identified as the discussions are private. The state-owned company aims to raise enough money to pay salaries, fuel its planes and cover other costs until March 2020, they said.
The banks all declined to comment.
SAA’s bid to obtain more loans isn’t assured, even if it secures state backing. When the carrier tried to raise the money needed to ensure continued operations for at least 12 months and to finalise financial statements for fiscal 2018, “lenders were not willing to extend facilities even on the strength of government guarantees,” it said in a document presented to lawmakers on Monday.
“The hesitant and inconsistent approach to addressing the recapitalisation of SAA has made it difficult for the board to conclude on its going-concern status,” the carrier said.
SAA last made a profit in 2011 and has failed to implement numerous turnaround plans. The carrier delayed publication of its financial statements for the year through March until its status as a going concern is assured — a contingency that will hinge on it securing more working capital.
The airline has received R57 billion in bailouts since 1994 and Finance Minister Tito Mboweni has been reluctant to give it more money or provide guarantees to enable it to raise more debt, saying it isn’t viable and should be shut down. Public Enterprises Minister Pravin Gordhan has said SAA will keep flying and a “radical restructuring” will be undertaken to ensure its financial and operational sustainability.
SAA’s acting Chairwoman Thandeka Mgoduso confirmed the carrier’s executive committee is engaging unidentified lenders, the Treasury and Department of Public Enterprises to secure the 2 billion rand it needs to pay November salaries and other creditors. The matter remains unresolved, she said in a Nov. 25 letter to parliament’s public accounts committee.
Gordhan’s spokesman Sam Mkokeli, and Mboweni’s spokeswoman, Mashudu Masutha-Rammutle, didn’t answer calls to their mobile phones seeking comment.
The South African Cabin Crew Association and the National Union of Metalworkers of South Africa, which together represent more than 3,000 SAA staff and staged a wage strike last month that forced the cancellation of a number of flights, said that they are not responsible for SAA’s financial woes.
“Airline management was aware as early as June this year that there was not enough money for operational costs from November onward,” the unions said in an emailed statement.
They accused Gordhan and Mboweni of undermining SAA’s brand and said that unless they took decisive steps to save the airline they would join a lawsuit filed by labor union Solidarity to have it placed in business rescue, a local form of bankruptcy protection.
© 2019 Bloomberg L.P.