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SAA in death throes as weekend deadline for its survival looms

Jan 16 2020 13:47
Pieter du Toit

SAA, the embattled national airline, seems to be in its death throes.

Although no official announcement has been made, indications are that government could finally jettison the entity, which has suffered losses of more than R30bn over the past 13 years.

SAA was established in 1934 and will be 86 years old on February 1. It is one of the oldest commercial airlines in the world.

In the strongest indication yet that the flag carrier will soon cease to exist in its current form, the airline has put nine of its airplanes up for sale, including Airbus passenger planes used on long-haul flights. According to Business Insider, some of the planes are used on busy international routes, including Frankfurt, Hong Kong, Munich and Perth.

National Treasury has also not yet provided bridging finance of R2bn the company needs to continue its operations. Finance Minister Tito Mboweni on Thursday morning did not want to commit government to the airline’s future, saying everyone should “keep their fingers crossed” while Treasury looks for funding.

SAA needs the bridging finance by January 18 – that is, Saturday. If it cannot secure financing by then, the airline will have to cease operations. Government will also have to take an immediate decision on the company’s future on that date, including the form SAA’s winding down will take.

News24 understands government will this weekend be forced to make hard decisions to prevent SAA’s liquidation. This is because the business rescue process will not allow SAA to continue in its current form. Should the company be liquidated, it will trigger the repayments of government guarantees to SAA creditors, which will have serious repercussions for the fiscus.

The business rescue practitioners appointed by the government, Les Matuson and Siviwe Dongwana, were on Thursday also locked in consultation with the major unions at SAA, including Numsa. Matuson and Dogwana’s spokesperson, Louise Brugman, earlier told Fin24 that the liquidation of the airline “is not…a current scenario”.

It is, however, unclear exactly what Matuson and Dongwana are briefing the unions on.

Information obtained by News24 suggests the ANC’s national executive committee will on Saturday devote the whole day to discussing the current and future of state-owned companies. It is expected that SAA and Eskom will top the agenda, with many in the party opposing the winding down of SAA as well as the breaking up of Eskom into three or four separate entities.

Indications are also that should SAA be forced to cease operations, in line with the laws and regulations guiding business rescue, that Mango – SAA’s low-cost subsidiary – will continue to service the main domestic routes. SAA will immediately stop flying to domestic destinations.

SAA will, however, immediately relinquish its landing rights at Heathrow, which will also save the company millions of rands. It is unclear how international flights will be wound down, or how long the national carrier will still fly before it ceases operations in its entirety. Winding down the company is also expected to cost in excess of R5bn.

SAA Technical (SAAT) looks set to be the jewel in the crown of the company, should it be broken up and sold in parts. Overtures from European carriers have been made to buy the unit, with experts in the field saying that it is one of the best functioning divisions in the struggling company. No decision has been taken regarding whether SAAT will be wholly sold, or only a part of it.

The company will also provide counselling and other forms of support to employees should developments lead to the winding up of the company.

saa  |  tito mboweni
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