BUSINESS MAVERICK: New SAA requires R26.7bn from taxpayers to be airborne

The business rescue practitioners of SAA have ditched a plan to launch a new state-owned airline, but have proposed keeping the old SAA and restructuring it to have smaller aviation operations.

SAA, which last turned a profit in 2011, is still expected to have a negative cash-flow position over the next five years. The airline is expected to have a cumulative negative cash-flow position of R59.7-billion between the financial years 2021 and 2025. A restructured SAA will still depend on public finances or the taxpayer, as a total of R26.7-billion – of which R10.3-billion is new money – will be required to settle the airline’s debt, fund the restart of its operations, and pay retrenchment packages to about 3,700 workers and creditors, whose debt is not guaranteed by the government, including aircraft lessors.

Dongwana and Matuson are convinced that the government will throw SAA another lifeline over and above thegovernment, as the sole shareholder of the company [SAA] and acting through DPE [Department of Public Enterprises], supports a business rescue which results in a viable and sustainable national flag carrier that provides international, regional and domestic services,” the rescue practitioners said in the 110-page business rescue plan.

To implement the restructuring proposals, the business rescue plan requires support/approval from about 75% of SAA creditors, according to the Companies Act, which regulates business rescue proceedings in SA. The plan will probably be approved because a majority of SAA creditors are commercial banks – including Nedbank , Absa , Standard Bank , and Investec – that outweigh smaller creditors and stand to receive money that they are owed in full.

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