Finance Minister Nhanhla Nene has not approved the proposed amendment to SAA's Airbus A320/A330 swap transaction structure, National Treasury said on Thursday.
Nene has instructed that SAA must implement the transaction structure in line with the approval that had already been granted. That would mean to conclude the agreement to swap the purchase of ten A320s for a lease of five A330s from Airbus.
According to Treasury SAA has not demonstrated that there was certainty that the proposed amendment to its Airbus A320/A330 swap transaction structure would leave the airline in a better financial position than it would otherwise have been had the airline implemented the original swap transaction structure.
Nene felt the available information indicated that the proposed transaction structure would actually leave SAA in a materially worse off financial position where it is unable to meet its commitments as they fall due.
"Although possible benefits may be realised through allowing the airline to continue to pursue an alternative transaction, these were far outweighed by the high probability of a default on the government guarantees and the severe consequences thereof," Treasury said in a statement.
Should SAA conclude a significant transaction with Airbus or any other party for which the airline has not received approval in terms of legal requirements, this would constitute an act of financial misconduct, which could be grounds for sanctions against the board, according to Treasury.
- Source: Fin24
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