SAA to go under 'urgent' business rescue

04 December 2019 - 19:50
By Kgaugelo Masweneng
Embattled SAA will go into voluntary business rescue, the presidency confirmed on Wednesday.
Image: SAA Embattled SAA will go into voluntary business rescue, the presidency confirmed on Wednesday.

South African Airways must urgently go into voluntary business rescue, President Cyril Ramaphosa has ordered.

In a leaked letter, secretary of cabinet Cassius Lubisi, said Ramaphosa made the order due to the "dire situation" facing the embattled national carrier.

"This is the only viable route open to the government to avoid an uncontrolled implosion of the national airline," the letter reads.

"The voluntary business rescue approach will also prevent liquidation applications by any of SAA's creditors, which would land the airline in an even worse position.

"We remain seized with the SAA crisis and will keep members of the executive informed at all material times."

Presidency spokeswoman Khusela Diko confirmed to TimesLIVE that the letter was official correspondence to members of the cabinet and deputy ministers.

"It is extremely unfortunate that this correspondence would have made its way into the public domain in this manner, as it undermines the very processes under way to deal with the very dire situation at SAA," she said.

The announcement comes just days after public enterprises minister Pravin Gordhan said the airline needed to go through a "radical" restructuring process to ensure its financial and operational sustainability.

“In pursuance of this, various options are being explored. SAA therefore cannot continue in its current form,” said Gordhan on Sunday evening.

Before this could happen, he said, SAA needed to get funding to keep the business running.

“Over the past few days there has been an intense discussion with lenders to secure the necessary funds to cover the operational and structural transition over the next few months.”

The DA welcomed Ramaphosa's decision, saying it had always held the view that business rescue was the most viable option for the airline - other than liquidation or stopping bailouts.

“It is very unlikely that the application for business rescue for SAA will be conceded to, unless there is a further bailout, presumably amounting to R2bn, from the South African taxpayer in order to provide the working capital required to enable SAA to continue trading,” said the party in a statement.

The DA said if business rescue is approved, it would take control of SAA out of the hands of the ANC.

“The business practitioner who is appointed must take robust action to immediately cut costs at SAA without any interference from the ANC. The DA will monitor this very closely in order to ensure that the ANC keeps its distance.”

The party warned that business rescue would come with an obligation for government guarantees of R19.1bn to be honoured. This would require an increase in sovereign borrowings, which in turn would increase debt service costs and place a further burden on taxpayers.