Bailout delay leaves South African Airways on brink of collapse

South African Airways said “time is of the essence” for the government to provide a pledged cash injection if the loss-making national carrier is to continue flying.

The National Treasury agreed last month to give the airline 2 billion rand (US$140 million) as part of the terms of its bankruptcy protection, but has yet to follow through. SAA canceled 38 flights this week to save money and warned that further cuts may be in the offing.

“We are awake to the fact that the money we need will serve as working capital and that time is of the essence,” Tlali Tlali, SAA’s spokesman, said by phone on Thursday. “While we do not sit with cash in hand, we remain optimistic that there will be a favorable outcome. We have been notified that the matter is receiving priority attention.”

SAA has lost money since 2012 as it grapples with mismanagement, high operating costs and an inefficient jet fleet, leaving it reliant on government bailouts to survive. Les Matuson and Siviwe Dongwana, who were appointed as SAA’s business rescue practitioners last month, are due to present a turnaround plan to creditors by the end of next month, but it is doubtful the airline can continue operating until then without additional state aid.

‘Working Feverishly’

Finance Minister Tito Mboweni said the National Treasury is “working feverishly” to source the 2 billion rand, which wasn’t provided for in the budget and will have to come from other sources.

“We have given our commitment that we will try to support SAA as much as we can and that we will work as much as we can to help,” Mboweni told the South African Broadcasting Corp. in Davos on Wednesday. Dondo Mogajane, the Treasury’s director-general, didn’t answer calls to his mobile phone.

The National Union of Metalworkers of South Africa and the South African Cabin Crew Association, which represent about 3,000 SAA workers, accused the government of undermining the effort to save the airline.

“We believe they have sabotaged that process,” Numsa spokeswoman Phakamile Hlubi-Majola said by phone. “It is unacceptable that the 2 billion rand that was promised has still not been paid. We want to see action.”

Source: goldstreetbusiness.com