The government of South Africa will provide South African Airlines (SAA) with an R1 billion ($53 million) bailout to assist the airline in paying off its outstanding debts.
According to a statement issued by SAA, the cash allocation is a component of the 2020 Business Recovery Plan implementation, which was announced by South Africa’s Finance Minister Enoch Godongwana.
Godongwana emphasized that the capital will be used to cover outstanding liabilities, in particular the final dividend payment to creditors and the refund of legacy un-flown tickets to affected passengers, dating back to the period when SAA was placed in business rescue in December 2019, the statement continued.
Chief Executive Officer John Lamola of SAA offered his thoughts on the announcement and the airline’s turnaround since it left business rescue in April 2021.
SAA is no longer technically insolvent, a milestone that we attained a year earlier than anticipated, as reported to Parliament earlier this month, according to Lamola. “SAA’s operations have advanced favorably since the airline emerged from business rescue,” Lamola said in the statement.
The Chief Financial Officer of SAA, Fikile Mhlontlo, made it clear that the airline is now breaking even and that the money allotted is not intended to carry out the business strategy. Mhlontlo stated that SAA has reached a position where operating expenses were covered.
It needs to be highlighted that the announced distribution solely applies to past debt, he continued. These monies are not intended to support the business strategy we are currently implementing.
On December 6, 2019, SAA entered business rescue. On April 30, 2021, SAA exited business rescue after undergoing a restructure of its business model that resulted in a considerable reduction of its debt and a reduction of its employees of over 80%. The airline soon after acquired Takastso Consortium as a new strategic equity partner.
The R1 billion ($53 million) allotment, according to SAA, is a portion of the R3.5 billion ($190 million) that was initially required for SAA to pay off all debt that the airline’s Business Rescue practitioners had ‘ring-fenced’ into a Receivership.
The total sum anticipated from National Treasury has been decreased to R2.586 billion ($140 million) as a result of SAA’s financial performance and the management team’s innovations, according to a statement from the airline.