South African Airways could receive another R8 billion from the government, according to a report from the City Press.
The newspaper reported that Minister of Finance Tito Mboweni’s plans to liquidate SAA and start a new airline were thwarted during a meeting of the ANC’s national executive committee (NEC) last week.
The party wants the government to rather restructure SAA and create a new profitable airline under the struggling carrier’s brand, an endeavour which will cost R8 billion.
This is in addition to the pending provision of R2 billion which SAA is set to receive as part of its business rescue process.
National Treasury missed the deadline to provide these funds last week.
“Not a bailout”
According to an “insider” in the government’s economic cluster, the additional R8 billion cannot be considered a bailout.
“The state will need money to finance a restructuring. It is not a bailout. If you are starting a new airline under the SAA brand, then you are going to finance it anyway,” the insider stated.
The decision was supposedly made to avoid the possibility of a R50-billion loss if SAA was to be liquidated immediately, as well as the prospect of a credit rating downgrade for the country.
Liquidation could further lead to lenders calling in their credit at other SOEs.
The new funding comes at a time when SAA is suffering severe financial woes.
It was placed in business rescue in December 2019 and has in recent weeks taken several steps in what appeared to be an attempt to avert total bankruptcy.
On 16 January, it announced it was selling nine of its Airbus A340 planes, several of which are still flying on routes to France, New York, Germany, and Australia.
On Tuesday, it announced it was cancelling a number of domestic and international flights to cut costs.
The national airline has a total debt of more than R12 billion.
Source: My Broadband