R5bn lifeline for SAA

Oct 02 2012 16:29
James-Brent Styan
Cape Town - Government has granted South African Airways (SAA) a R5bn guarantee for a period of two years starting from September 1 2012.

Mayihlome Tshwete, spokesperson to Minister of Public Enterprises Malusi Gigaba, said the guarantee will enable SAA to borrow from global financial markets.

“This guarantee will ensure that the airline continues to operate as a going concern.”

Gigaba has been meeting with Treasury on behalf of SAA. The carrier told parliament in February it needed between R4bn and R6bn in a recapitalisation.

Gigaba earlier told Afrikaans newspaper Beeld that any financial assistance to SAA will have stringent conditions.

One of the conditions just announced was that the guarantee requires SAA's board todevelop a turnaround strategy to be approved by the minister in concurrence with the minister of finance.

SAA will also have to provide the department of public enterprises (DPE) and minister of finance with the financing strategy for its planned purchase of short and long haul fleet.

The national carrier is in the process of replacing its fleet with new, more fuel efficient Airbus aircraft.

The departement said a technical committee comprising representatives from the National Treasury and DPE will also be appointed to monitor SAA’s financial position as well as progress in developing and implementing the turnaround strategy. 

Tshwete says government is committed to working with SAA’s management and board of directors to ensure that the airline is viable and financially sustainable.

Last week eight SAA board members resigned after Gigaba decided to postpone the tabling of SAA’s annual results for 2012.

The minister said the decision was made to allow Treasury and DPE negotiations over financial assistance to be concluded.

A new board has since been appointed.

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