The business rescue announced for cash-strapped national carrier South African Airways will allow it to continue operating in an orderly and safe manner and keep planes and passengers flying under the direction of a rescue practitioner, public enterprises minister Pravin Gordhan said on Thursday.
SAA said its board of directors had – after consultations with the shareholder the government – resolved to place the company into business rescue in an effort to find a solution to its financial challenges.
In a separate statement, Gordhan said existing lenders to SAA would provide R2 billion as post-commencement finance (PCF) guaranteed by the government and repayable out of future budget appropriations in order for the business rescue process to commence and to enable SAA to continue operating.
The government through the National Treasury would provide an additional R2 billion of PCF in “a fiscally neutral manner”, he added.
In its own statement, SAA said it was seeking to minimise the destruction of value across its subsidiaries and provide the best prospects for selected activities within the group to continue operating successfully.
It acknowledged the business rescue presented many challenges and uncertainties for its staff, saying it would engage in targeted communication and support for all employee groups.
“SAA will endeavour to operate a new provisional timetable and will publish details shortly,” the airline said, adding the board would soon announce the appointment of business practitioners.
Services operated by its subsidiary airline Mango would continue as usual and as scheduled, SAA added.
Gordhan said business rescue would provide an opportunity to critically review the cost structure of the airline, while simultaneously attempting to retain as many jobs as possible.
“This reality was clearly understood in the recent wage negotiation process between the unions and the company,” he said.
This approach also provided a structured opportunity to reorganize state aviation assets “in a way in which they are better positioned to be sustainable and attractive to an investment partner”.
“It must be clear that this is not a bailout. This is the provision of financial assistance in order to facilitate a radical restructure of the airline,” Gordhan said.
“The creation of a sustainable, competitive and efficient airline with a strategic equity partner remains the objective of government through this exercise.”
A letter dated Wednesday from secretary of the cabinet Cassius Lubisi to government ministers said business rescue was the only viable route open to the government to avoid “an uncontrolled implosion of the national airline” and the approach would also prevent liquidation applications by an of the airline’s creditors, which would land it in an even worse position.
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Source: African News Agency (ANA)