SAA nears debt rollover agreement with lenders

An agreement with lenders would ease the state airline’s dependence on National Treasury.
Vuyani Jarana, CEO of SAA, was hired in late 2017 to lead a turnaround of SAA after years of mismanagement and corruption scandals. Picture: Moneyweb

South African Airways is moving closer to an agreement with lenders to extend R9.2 billion of debt, a deal that would buy the unprofitable state airline more time to restore its battered finances.

An agreement has been reached “in principle” to roll over the borrowings, “but of course there are certain conditions that need to come through,” Chief Executive Officer Vuyani Jarana said at the CAPA aviation conference in Dubai on Tuesday. “It’s an ongoing conversation.”

An agreement with lenders would ease SAA’s dependence on the National Treasury, which allocated R5 billion to the carrier last year to help it meet debt payments. Finance Minister Tito Mboweni has made clear the government is reluctant to approve a further outlay, saying in November he favours shutting down the company. Eskom Holdings, another state entity, was in February granted a record R69 billion bailout to be paid over three years.

Jarana was hired in late 2017 to lead a turnaround of SAA after years of mismanagement and corruption scandals. One of his plans is to transfer four unwanted Boeing SA aircraft from the main airline to low-cost carrier Mango, which has the scope to increase capacity, he said.

“There’s more growth in the low-cost services in the domestic market, which makes Mango very critical for SAA,” he said.

SAA is also looking to hire an adviser to help sell the state-owned airline’s catering business, Jarana said, a move that would raise capital and rid the carrier of less important assets.

© 2019 Bloomberg L.P

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What has he done in this year and a bit. Nothing, still seems to be thinking and planning. Then of course the next step is advisors. Another useless exercise while the debt climb.

It is absolutely ridiculous to suggest that rolling over the debt with lenders will reduce the airline’s reliance on the National Treasury. SAA could not borrow five Ront without full state guarantees. It is hopelessly and completely reliant on state support, regardless of whether lenders agree to roll over the debt. This is really just an optical illusion to maintain the fantasy that the airline has the means to borrow on the open market when it manifestly does not.

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