Administrators for South Africa’s loss-making state airline have defended their decision to cut routes as part of a turnaround plan, after objections from President Cyril Ramaphosa, government and labor unions.
South African Airways will halt service to nine international cities, including Hong Kong and Sao Paulo, and cease all local services except those between Johannesburg and Cape Town. The move is “in the best interests of SAA,” joint administrators Les Matuson and Siviwe Dongwana said in an emailed statement Sunday.
“They are intended to make the airline commercially and operationally sustainable, free from the requirement of future funding from the government post the implementation of the restructure,” the administrators said.
The Sunday Times reported that South African banks have refused to provide an 8 billion-rand ($531 million) loan to enable a turnaround even if the government guaranteed the funding. A loan offer by an international bank with links to the U.S. and U.K. was rejected because it was too low, according to the newspaper.
On Friday, Ramaphosa said the government disagreed with the decision to cut almost all domestic routes because the carrier is an “economic enabler” that allows people to move around the country. Public Enterprises Minister Pravin Gordhan said the government would propose the cuts be reviewed as they may jeopardize SAA’s long-term future.
The administrators said they would engage with stakeholders and include their input in a final business rescue plan due at the end of the month. They took control of the carrier in December after it was placed into a local form of bankruptcy to try to end a cycle of regular state bailouts and battles with creditors.
Source: Bloomberg
