Africa Aviation Debt Economy Finance Travel

US$137M life support to ailing South Africa Airways Is limited

South African Airways can’t keep counting on bailouts after the government pledged 2 billion rand ($137 million) of support to keep it operating, public enterprises minister Pravin Gordhan wrote in South Africa’s Sunday Times.

The national carrier will need to slash costs and boost revenue because the government is no longer able to provide “continuous bailouts,” Gordhan wrote.

South Africa’s finances are already stretched by demands from other beleaguered state enterprises such as power utility Eskom Holdings SOC Ltd., to which it has allocated 138 billion rand in bailouts through March 2022.

The government handed control of loss-making SAA to an administrator this month in a bid to stave off liquidation and avoid thousands of job losses. Under voluntary business rescue, a local form of bankruptcy protection, a board-appointed administrator takes charge and tries to turn around a failing company.

The airline’s spiral into financial distress left the government with few options, Gordhan wrote.

SAA had become like “a patient experiencing multiple organ failure,” he wrote. Going into administration gives it “the best chance of retaining viable parts” and attracting an equity partner, according to Gordhan.

The airline last made a profit in 2011 and has received 57 billion rand in bailouts since 1994.

Source: Bloomberg

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