SA Airlink asks court to rescue it from SAA

Failure to pay over R700m could cause Airlink to crash.
If the money isn’t paid over Airlink will be entitled to vote for or against the adoption of the SAA rescue plan. Image: Moneyweb

SA Airlink has approached the High Court in Johannesburg for special permission to sue South African Airways (SAA) and its business rescue practitioners (BRPs) for more than R700 million in outstanding Airlink air fares.

SAA has been in business rescue since December 5 last year, which by law places a general moratorium on litigation and enforcement of claims against a company.

In terms of the Companies Act a litigant requires written permission from the BRPs to proceed to court – but Les Matuson and Siviwe Dongwana, who have been appointed to rescue SAA, have not responded to a formal request for such permission, Airlink CEO Rodger Foster says in his founding affidavit.

He asks for access to the court and urgent intervention in a matter that is putting Airlink’s operations at risk. He asks the court to order the BRPs to pay the outstanding money over within five days.

Foster explains that SAA and Airlink have been in a long-standing alliance which entailed, among other things, that SAA sell Airlink flight tickets on the SAA platform using SAA’s computer system.

SAA merely acts as an agent for Airlink, selling tickets and collecting revenue on its behalf.

Airlink operates its flights independently, Foster explains. It has paid for a licence to use the system and SAA earns a commission on all ticket sales.

The ticket revenue and certain related charges that flow through the SAA system however belong to Airlink, and cannot therefore be classified as debts owed by SAA, Foster argues.

SAA used to produce statements on Airlink’s behalf and pay the amounts over, after certain deductions, at regular intervals as agreed between the parties.

It’s ‘debt’, say the BRPs

The BRPs however consider the amounts to be pre-commencement debt, which means they are classified with other debts SAA incurred shortly before going into business rescue. Such debts are put on hold while the company remains in business rescue and creditors are precluded from enforcing claims to them.

According to Foster, the BRPs are currently withholding:

  • R430 million for flown tickets and related revenue collected in November;
  • R83 million for flown tickets and related revenue for the first five days of December before going into business rescue;
  • R201 million in “unflown” revenue for tickets sold but not utilised between July 2018 and November 2019.

Airlink was able to reach an agreement with the BRPs about the revenue earned from December 6 onwards and it is currently being paid over on a daily basis.

Foster tells the court that SAA’s failure to pay over more than a month’s revenue to Airlink has placed the regional airline that employs more than 1 700 people in a precarious financial situation. “Without this cash being paid, Airlink may not be able to continue operations in the very near future”, he states.

“The airline business is a low margin one. Airlink relies on high turnover and consistent cash flows to fund its business on a month-to-month basis.”

He says the flown revenue due to be paid by SAA “has been earmarked, and is in fact necessary, for payment of SAA’s creditors as they fall due in the ordinary course of business.”

Airlink incurred R389 million in operating expenses in November, and due to SAA’s refusal to pay over its revenue, had to use working capital reserves to fund these expenses, Foster says.

“SAA’s default has already caused Airlink to breach one of its aircraft debt finance covenants with Investec Limited.”

Foster says there is “reasonable apprehension” that SAA’s default may cause Airlink to run out of working capital sources within six to eight weeks, which “may imperil the business of Airlink”.

He says unless the court orders SAA to pay the money to Airlink, the jobs of its 1 739 staff members “may also be placed in jeopardy”.

Foster says the BRPs have in fact indicated that if their classification of the outstanding amounts as pre-commencement debt stands: “Airlink is unlikely to recover any substantial amount. This indicates that there will likely be little to no available cash in SAA to pay over the flown revenue in future.”

Read: SAA has reasonable chance of rescue – specialist

SAA last week obtained a controversial loan of R3.5 billion from the Development Bank of Southern Africa, of which R2 billion was made available right away. This after an initial R2 billion of post-commencement finance funded by a consortium of banks has seemingly been depleted and government failed to provide the R2 billion it promised when initiating business rescue.

In the meantime SAA’s own revenue is drying up as travel agents and the flying public respond to the uncertainty by booking with other airlines. This contributed to SAA’s announcement last week of the cancellation of almost 100 flights in February.

Foster has asked for the application to be determined urgently in the next two weeks, before the finalisation and vote by creditors about SAA’s business rescue plan at the end of February.

He says if the money SAA owes Airlink is indeed classified as pre-commencement debt, Airlink would be one of SAA’s biggest creditors and would therefore be entitled to vote for or against the adoption of the plan.

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SA Airlink gets thrown to the wolves in order for SAA to survive?

The citizens should ask court to rescue it from all SOE’s.

All in all it’s just another brick in the wall. SAA is totally irreversibly completely undeniably true-as-Bob bANCrupt. Placing it in BR is like placing a horse that died 2 years ago in ER! AVBOB should have handled the final rites, not Matuson & Dongwana.

Airlink should just cut to the chase and ask that all taxpayers EFT it directly for any amounts that it is expecting to claim from SAA, that is where the money comes from after all. Feel free to share your banking details and I will think about my own contribution… Along with my contribution to etolls and Eskom, considering that I’m currently sitting through loadshedding…

Also by “crash”, is this meant literally or figuratively? It’s best to avoid using that word in any aviation-related articles!

We now understand why a return trip from George to Cape Town costs R4300. Everyone takes a cut sponsored by the tax payer . Close the damn SAA and let the free market take its course.

There is no Free Market in RSA , only supposed Freedom , which ANC voters feel means everything is for free (are are we just Dom ?) .

Airtime between CT and George +/- half an hour. Car time to the CT airport from almost anywhere in the city is about an hour and a bit, unless you live next door and can walk. Another half hour flight time and then another half hour to disembark, hire a car and be in George center – maybe because not much happens at George airport. And then there is the risk of hitting that hill outside George – not quite the same risk as the car trip – but all in all the drive to George with the scenery and all is cheaper and quicker. I’ve done both by air and road and the drive was quicker, cheaper and more enjoyably. I wish Airlink and the clowns running Wonderboom airport would get their act together and resume flights to CT – brilliant – used to cost the same more or less for return and only took me 20 minutes to get to Wonderboom and board the flight. So much better than Lanseria and ORT and made the CT part bearable. Bring it back Airlink and forget the George trip – there are more politicians and public servants in Pretoria needing the CT trip than in George.

AS LONG AS THE cANCer troop runs monkey land nothing will change .Is it a good time for a tax revolt now or have we missed that opportunity also

End of comments.

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