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Government to foot the bill for ‘restructure’ of new SAA

Discussions with airline’s yet-to-be-decided equity partner still to be concluded.
Gordhan accused the airline’s locked-out pilots of sabotage as they ‘keep postponing training that can easily be done daily quickly in order that [other] pilots are up to date’. Image: Rogan Ward, Reuters

The government is set to cover the full cost of recapitalising embattled state-owned entity South African Airways (SAA), according to Public Enterprises Minister Pravin Gordhan.

The airline, which was placed in business rescue in December 2019, has been grounded for a year following global travel bans aimed at limiting the spread of the coronavirus.

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Business rescue practitioners Siviwe Dongwana and Les Matuson notified the airline’s creditors and employees earlier this month that SAA has already received R2 billion in working capital to resume operations.

This is however unlikely to be sufficient to cover the cost of recapitalising the cash-strapped state owned carrier.

New airline won’t need ‘any further funding from the fiscus’

Gordhan told parliament’s Standing Committee on Public Accounts (Scopa) on Wednesday following the exit of the business rescue practitioners the new airline that is expected to emerge from SAA will not need any further funding from the fiscus.

Read: SAA rescue process to be finalised end of March, BRPs say (Mar 19)

Costly process

SAA has not made a profit for over a decade and has relied on government bailouts to remain afloat.

As at May last year, the business rescue process had already cost the shareholder (the taxpayer) R207.5 million.

This included payments for legal and advisory services to various companies including Bowman Gilfillan and PricewaterhouseCoopers, as well as Dongwana and Matuson.

The rescue practitioners said they would provide the committee with an updated cost of the 15-month long rescue process in due course.

When the viability of the airline will be determined

Gordhan said the airline is in the process of acquiring an equity partner that will provide further capital for SAA.

He declined to name the airline’s potential partners, saying that doing so would potentially compromise the discussions.

“Once we [government] take responsibility for the restructuring costs, the partner has to come in with future capital and that will then – together with the appropriate planning and expertise that is brought in from South Africa or within SAA and from outside – [be when] the viability of the airline will be determined.”

The business rescue plan, which was approved by creditors in July last year, envisaged that the airline would resume operations when the country eased restrictions, with domestic travel commencing under levels two and three of the lockdown and international travel resuming under level one.

However the airline was only able to conduct some repatriation and cargo flights throughout 2020 due to financial constraints and continued travel bans.

Questions around profitability ‘premature’

Responding to questions from committee members regarding the profitability of SAA, Gordhan said it was still premature to determine this, adding that: “A lot has changed and Covid has impacted on the aviation industry both globally and in South Africa.”

SAA has received R7.8 billion of the R10.5 billion that was allocated for the implementation of the business plan in the 2020 medium-term budget policy statement (MTBPS). This amount covers payments to employees, payments to post-commencement creditors and unflown ticket liabilities.

Of this amount, R2.8 billion was used for the payment of retrenchment packages, voluntary severance packages and unpaid salaries, while R700 million was used to pay creditors.

Breakdown of MTBPS funding allocation

Source: SAA business rescue practitioners

The payments to employees exclude most members of the SAA Pilots’ Association (Saapa), who have been locked out of the airline since December following a deadlock in negotiations regarding their three-decade long Regulatory Agreement.

Read: SAA tries to replace locked-out pilots with outsiders (Mar 12)

Dongwana told parliament’s watchdog that Saapa has agreed to change some conditions of employment and that the airline remains hopeful that a settlement acceptable to both parties will be reached.

‘Sabotage’

Gordhan used the opportunity to accuse Saapa members of attempting to sabotage SAA from getting off the ground.

“Particularly because some of them run the [pilot] training section of SAA and keep postponing training that can easily be done daily quickly in order that pilots are up to date in terms of the regulatory requirements,” he said.

“What the pilots’ association is doing is highly detrimental to what we want to achieve as government, which is to get a successful airline off the ground.”

The remaining R2.7 billion of the amount allocated to implement the rescue plan is expected to be used to recapitalise the airline’s subsidiaries – SAA Technical, Mango Airlines and Air Chefs. These funds have not yet been disbursed.

Dongwana told the committee the Department of Public Enterprises had advised the rescue practitioners that the balance of funds would be made available for the subsidiaries once certain government processes had been resolved.

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“Government to foot the bill for ‘restructure’ of new SAA” – sorry sorry the the heading should have been and is actually “THE SA TAXPAYER to foot the bill for ‘restructure’ of new SAA”

Whilst the “partner” is such a high secret question is: “is there actually a partner or is the partner the sa taxpayer?”

In the sentence: “Once we [government] take responsibility for the restructuring costs, the partner has to come in with future capital and that will then – together with the appropriate planning and expertise that is brought in from South Africa or within SAA and from outside – [be when] the viability of the airline will be determined.” – the “we” should also be replaced with the “SA Taxpayer” – The full sentence actually points out that although proudly announced that SAA was “solvent” again, there is actually still no future planned for it yet – SAA WILL NOT MAKE IT independently, in any near future without the funding and refunding from the sa taxpayer money. It is a still born baby. Why does gordhan not do the training “quickly” himself if it is so simple and straight forward??

sa government says they want to “get a successful airline off the ground” – WHAT was done in the past 20+years by the same government to keep saa in the air????????????

Who is this “Government “ you are referring to ? The same one that stole the country blind without shame ? The same one managed by the most incompetent and corrupt people ? The country with most racist business law aka BEE ? Any person other than the ones mentioned above will NOT FLY SAA. We WILL revolt against any senseless tax decisions . We are “gatvol “

Thanks, you saved me a lot of typing

This is not acceptable. Pravin said that government would stop putting money into SAA, that was one of the reasons for getting an equity partner. I do not accept Pravin making a u-turn on this

Know how you feel, buddy, but some of us learnt very l o n g ago not to believe a word he says; you should learn that too..

Okay everyone lets go to work today and the rest of the next 100 years so that we can pay for SAA.

@The Speculator: In the meanwhile, while that is being done, we request your patience for life-saving vaccines. Take a knee for the poor politicians – as per PLM. They are really trying to spend as much of our tax money to suit their self-interests while feeding in the public trough, ensuing nobody needs to step aside. Proudly brought to you by ANC, viva ANC viva!

maybe the partner will be the Pensionfunds? 🙁

See the last paragraph of article;”…the balance of the funds would be released… once certain government processes had been resolved.”
Hmmm – WHAT government processes?
Looting? Well, SARB’s billions proved a bit of a hard nut to crack (which doesn’t mean further future attempts are out of the question,) but perhaps a bit of a raid on pensions (disguised as a legitimate process through parliament or slipped in through the back door in much the same way as Mango getting a fat share of the SAA rescue process last year) is the quickest way to go right now. Time is afterall quite a factor, as Gordhan himself admits. Gordhan should have become a Houdini for the ANC; the man who can always pull a rabbit from a hat in the nick of time….watch this space….

In particular the GEPF, which would explain Gordhan saying that “Government” will foot the bill, which of course it won’t.

Or maybe even AYO? They seem to have a few billion left from the PIC “gift”.

Who would have thought that a socialist, racist government that wants to decolonise South Africa would persist with keeping this colonialist business with colonialist technologies on life support with public money so that they could transport their egos and their spawn around?

Isn’t that the epitomy of our government.

Are you saying that the same incompetent fools who got SAA into this position will not be able to remedy the situation with another turn around strategy?

“…got SAA in this position…”

WHAT position exactly? You mean solvent, streamlined and ready for take-off? Viable???? Well, hmmm, maybe, says Gordhan. THAT will be decided later.

If not, that’s where the next turnaround plan will kick in!

Out of principle, I will not fly or support SAA.

The way I see it, the sooner their demise, the sooner the strain on the tax payer stops.

I can proudly say that I haven’t flown with SAA in the past decade.

I wont fly with their offspring either.

Ditto!

Moneyweb should know better . No Government ever pays for anything …. It’s only the taxpayer who does !!

Moneyweb is QUOTING the minister, so blame HIM!

@Louise: If MWeb is quoting, they definitely must put the word “Government” in quotes as done with the word restructure, because the lie must be emphasised.

Taxpayer will pay for Jamnadas and his ANC accomplices to fly freely all over the country.

People go to bed hungry here with unemployment soaring daily, we cannot afford vaccines, people die of Covid in the Eastern Cape in agony due to shocking medical facilities and half the population lives in shanty towns.

But no-the well fed Jamnadas spends billion son this evidencing the callousness, cruelty and arrogance of him and his fellow ANC gangsters.

The fallout from supporting failing SAA instead of the country’s infrastructure which would create jobs and social upliftment is far far greater than we can imagine …..by resuscitating SAA, the ANC are handing votes in truckloads to the EFF.

Certainly!

“Stubborn”: having or showing dogged determination not to change one’s attitude or position on something, especially in spite of good arguments or reasons to do so. Example: “a stubborn refusal to learn from experience” Expression: “As stubborn as a mule”.

The question that keeps going round and around in my head : If these guys, through blatant theft, incompetency, fraud, corruption and whatever other descriptor you can find bankrupted the airline, then why would the new airline fair any different, it’s going to be the same people doing the same things.

So don’t use energy on questions in your head; just make sure you and your friends don’t ever fly SAA or its low-cost government-owned sister airline, Mango! That’s basically a good place to start right now!

What a disgraceful waste of taxpayers money on an ANC vanity project. Meanwhile commuters who depend on trains have to put up with substandard transport? And as per the comments below the only money government has is taxpayer’s money.

Sorry, sweetie, but the Government doesn’t have any money, at least any money it hasn’t stolen. I do know a small group of taxpayers who do, though. Perhaps you were really referring to them.

What is really interesting is that the ‘viability’ of SAA will only be determined once a new (highly secret) partner and new skills are brought on board. If the viability of SAA has not been established then what the hell is Gordhan thinking. Which equity partner is going to provide operating capital for an entity where the shareholders (government) has not a clear idea of the viability of SAA?

SAA has been dead for some time and Gordhan and the highly effective ANC are going to resurrect the carcass they refuse to bury.

I sincerely hope that good sense will prevail and all these rotten apples in government will be replaced soon. Wishful thinking.

The idiots in charge of this country will bankrupt everything to have free flights for themselves and relatives — May they all be Alpha Floored !!!

I dont know who Gordhan is trying to fool…he must think everyone is an idiot. I want to smoke what he does.

He gets away with it! His party is re-elected 6 times in a row. You know where the problem lies-its the voters who have been bought with income grants, BEE and government jobs!

Gordhan is in fact correct in treating the population as idiots given that at least 60 odd Percent vote ANC and the really Debilitatated 10 Pct vote EFF .

Very realistic estimates, given that the SA National IQ is around 75.

I would like to know when the Unflown Tickets will be refunded.

Are you SERIOUS? Really, I want to know.

What if all South Africans stop using SAA and all airplanes are empty of passengers will government then still bail it out?

I see no other way of getting the message to government.

Why must we pay for an Airline company if we do not want to?
What have we got to do with SAA?

PLEASE understand – it’s MANGO too that must be boycotted!
Read the article carefully and SEE for yourself!
It seems you don’t know how Mango got R1bn bailout last year (2020) out of the blue as part of SAA’s rescue process? Does that make sense to you? NO!
So make sure you don’t fly SAA OR Mango – trust me on that, I followed the whole saga of the Mango bailout to the detriment of all low-cost competitors like Safair, Kulula, British Airways (SA). Just DON’T fly Mango (or SAA); both are part of the Gordhan Castle in the Sky myth and BOTH squander our taxes!

What I see is Gordhan putting out a commissar’s directive or edict that all government, SOE and municipal travel shall be with SAA, maybe Mango. SAA will charge whatever they please to balance their books and the gravy train of cadre employment and tenderpreneuring will carry on; until the trough is empty. For what? Vanity, greed, ideology, who knows, nothing most of us would subscribe to.

Thando, you should know better than to intimate that the Government has it’s own money to splash out on ludicrous, wasteful, non-sensical ventures. We haven’t approved this in an form whatsoever. #Declined.

I think we need to remind government that it is not them that is funding a lost SAA business, but South African tax payers. They do not have our permission.

WHERE DOES “GUBMENT” GET THEIR MONEY FROM????????????????????????
Don’t be upset with shoddy reporting the industry over the last 5 years has lost a lot of good journalists. Who’s left???

I do (before Covid) about 60 flights per year, locally but mostly internationally. I have the privilege to experience the quality and services of many an airline. Even if SAA was solvent on it’s own and made profit without the help of the taxpayer, I would never fly SAA again. I don’t feel safe. The planes are old and the interiors are falling apart. The flights are delayed internationally most of the time. No thanks.

I rather take the long routes and fly Emirates, Qatar etc. Enjoyable flights, with good food, good inflight entertainment and the entertainment systems which are very user friendly. The bonus is costs is mostly lower and you get a lot of free upgrades, or maybe I was just lucky. Direct flights you can have your pick of any of the big ones, should you be time constrained.

The only way SAA can have any sort of survival rights is if government give most routes to and from SA to SAA and limit the airspace for the rest, but for all practical purposes (their balance sheet put aside), they don’t have any right to exist in the current aviation sphere, the competition are just too good. Sorry SAA, I am proudly South African and I wish you were better, but not willing to put my life on the line with your aging fleet.

Lord Beerus, you have absolutely nothing to stress about. SAA currently has NO fleet, never mind an ageing one. No interiors falling apart. No safety issues. No viability. No plan. No equity partner. No pilots (they locked them out). Nothing. NADA. Just a flying wet dream in Gordan’s mind…

Would the honourable Minister please enlighten the taxpayers out there how he believes this V2 will rise from the ashes when something as simple as this is overlooked, he stated, “Particularly because some of them run the [pilot] training section of SAA and keep postponing training…”, this is not postponing of training. YOU, the DPE and the BRPs have locked the pilots out. That means no salaries and no access to any SAA property, pray tell how this training should take place?
I urge the press to investigate all angles and get the facts, the misinformation is staggering.

Take note, to date no pilot has been retrenched.

No mate, the minister wants the naughty pilots that HE and his BRPs chucked off the premises and threw away the lock when the pilots refused to simply hand over an important last legal labour right, to do exactly THAT! Gordhan wants a winner takes all. He accepts no responsibility for all the bailouts he granted even when something as basic as financial statements didn’t exist – nevermind audited! And allowed this to carry on for years.
And he wants you, the pilots, to pay from your pockets for his past mistakes.
He’s trying a scorched earth policy, hoping the pilots will crack first so he and his BRPs can unlock the training facility for them. In the interim they tried to replace the pilots with outsiders but soon found themselves up against the law!
So it’s Pravin himself and his DPE that keeps postponing the training!

I think common sense suggests that SAA would not be a good choice. If anyone considers this comment to be flawed then lets hear the reasons please!

“In a democratic country, the mindset of the government reflects the mindset of the average voter”

“The problem in South Africa is that the people who vote for a living outnumber those who work for a living”

– Sensei

And until that problem is solved, folks, we can comment on articles like these until we are blue in the face. We will merely be repeating ourselves.

Don’t stress guys, SAA will not fly. We have heard the same message in different forms for over a year.

No pilots, no passengers….

Don’t be too sure of THAT; they’ll just use pilots with no training or inadequate training like they did last month. How stupid can you get; lock out the very people whose job it is to train (pilots) and then resort to scandalous victim and slander tactics when you have to report to a committee in parliament! Gordhan failed miserably and is looking for scapegoats!

They might not fly but surely the contracts of the “connected” are still being honored?

When this fails again, as it will, can the Treasury claim the funds lost by SAA from Minister Gordhan’s pension fund?

That he see this as his personal legacy project and has been allowed to do so is not only disturbing but putting more and more of us into an even more and more of a depressed state.

This makes me so angry.

GOVERNMENT cannot foot any bill… Only the taxpayers can!

When the hell will the country wake up to this simple fact?!??

Tell the blind sheep and vested interest in SAA to wake up, while DPE remains in control there is no law that prohibits how government spends money what’s the point of a PFMA and a supply chain management act when the SOE itself falls short on what the act requires. There are too many brown envelops of SAA. SAA is like a social grant the more capital it’s needed the more beneficiaries it can pay. It is disgusting that an airliner has to borrow money to pay wages, that is disgusting indeed. I don’t care how many people have been laid off, the only viability is that it returns to full profitability and the cost of keeping that fool flying should not be me and you. If the whole country refuses to fly SAA then they can go bankrupt within days. Everything must go, firesale. While the Ill informed people keep this machine going so will the list of beneficiaries keep growing. We can type and comment until we are blue in the face SAA will stay unless it collapses from within completely from suppliers to unions to staff to management to DPE, then SAA is finished totally done for good.

Suppliers? Most suppliers are creditors who lost all their businesses when the business rescue practitioners cut them out, saying only “preferred” creditors like the banks, are provided for. The rest – suppliers amongst other smaller operators and British Airways who was owed money for an antitrust claim it won against SAA decades ago – walked off with nothing! Oh, mind you, they may have been offered shareholdings in Gordhan’s New SAA, the one that’s still not able to train its pilots because the training unit was kicked off the premises!

Maybe these communist anc fools need to work out where and from whom they source their money?

New airline won’t need ‘any further funding from the fiscus’, I am not sure how on Earth they plan on achieving this how can they state SAA will not need any money from the fiscus, it is the fiscus that they sucked dry with the erroneous bailouts and dubious contracts. The government is hell bent on letting SAA go because the vested and controlling interest. To date no public news of who the equity partner is, secondly I think the debt was deferred or sold via a debt to equity swap. Remember the state acts as a guarantor of the debt of SAA and in hindsight they deferred interest and debts payable back to creditors. Something is stinking about this agreement, the original BRPs wanted to liquidate the airline, then all parties and majority union got involved and everything went sour from there a long and dragging process warning nice fees for BRPs and now out if nowhere bang SAA liabilities from 38 billion to almost none, WHO ARE THEY FOOLING HERE TAXPAYERS OR SOMEONE? this entire deal is shambolic and something stinks, the contracts are still running in the background so someone is paying for this entire fiasco, collapse and corruption of the SAA and it’s workforce alike

UN….BLOODY….BELIEVABLE!!!!!!!

What’s the point in resuscitating SAA anyway? Without a Vaccination policy, no one will be going anywhere anytime soon! Yet another waste of taxpayers hard earned cash! And what for? So government officials can fly for free taking their gold bars and diamonds with them! Haven’t they heard of bitcoin???? Lol! The Nigerians certainly have!

I’ve gotta hand it to the editors at Moneyweb: they know how to get engagement. Write an article about SAA and watch the comments roll in..

Bad mouthing anyone without affording them an opportunity for response is known as victimisation. This article victimises SAAPA, just like most all other so-called “reporting” on the subject.
Unprincipled journalism is not journalism, it is gossip and character assasination for personal gain and needs to be criminalised.

End of comments.

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