Struggling SAA taps into guarantee

South African Airways has received a second loan bail-out within three months - to ensure that it has enough working capital to continue flying.

The loan of R570-million was provided by Absa and Investec and tops up an emergency loan of R550-million granted to SAA at the end of December. The R550-million loan is repayable in March.

Mayihlome Tshwete, spokesman for Public Enterprises Minister Malusi Gigaba, said the loan was granted under the R5-billion government guarantee provided last year. "Of that guarantee, R1.5-billion was set aside for working capital to assist SAA for operational reasons, and they're beginning to tap into it."

Tshwete said bridging facilities have been put in place to ensure operations are not destabilised while SAA is implementing its turnaround strategy. The struggling state-owned airline may ask for further financial assistance from government once the turnaround plans are finalised and the viability of the request will be considered at such time, he said.

The bail-outs are not detrimental to private aviation companies as the market is "very competitive", Tshwete said. In November, 1Time became the 10th out of 11 private airlines launched since deregulation in 1991 to fail.

"SAA has a very positive impact on the South African economy and is a strategic asset. It links us with critical trade and financial markets and plays an important role in promoting tourism and inter-African trade," he said.

According to Tshwete, the airline may tap into the remainder of the R1.5-billion guarantee to repay the R550-million due in March. An insufficiently capitalised balance sheet has meant that SAA has not been able to upgrade its fleet and save on its fuel bill, he said.

In addition to its financial problems, the airline has seen a number of changes at board and chief executive level in recent months. In September, chairwoman Cheryl Carolus and most of the board resigned, citing a lack of support from government. Carolus's replacement, Vuyisile Kona, was appointed as acting CEO in November. The board is now chaired by Dudu Myeni.

Tshwete said there have been a number of applicants for the CEO position and a recommendation will be made by the end of March.