The administrators of South African Airways (SAA) said conditions for a business rescue have been met.
The administrators commented in a notice to interested parties.
The Department of Public Enterprises (DPE) announced earlier this month that the National Treasury had committed to funding the creation of a new national airline.
“The Department of Public Enterprises welcomes the commitment by National Treasury that the government will support and source funding for a business rescue plan for South African Airways (SAA), which will result in the emergence of a new viable sustainable, competitive national airline,” the DPE said.
The business rescue practitioners projected that R10.1 billion will be required to fund the rescue plan and address these tasks:
- Clean up and stabilise SAA’s balance sheet.
- Restructure the company.
- Provide working capital.
- Build a stable platform for a new national airline.
The restructuring of SAA will also include 2,700 employees being issued with severance packages that meet the minimum requirements of the Labour Relations Act.
These packages offer an incentive for employees at the lower-end of the remuneration scale to ensure they are not worse-off.
Partnerships remain on the table
The department previously noted the current situation for the air travel industry and said that it had not ruled out any partnerships with other airlines.
“The DPE is cognizant that airlines across the world are in turmoil due to the COVID-19 pandemic,” the department said.
“There are possibilities for airline partnerships to improve the scale and scope of the aviation industry and ensure continuity of value creation to the South African economy.”
It said it welcomed the attraction of a mix of local and international investor groups to provide the new national airline with technical, financial, and operational expertise.
This will ensure significant South African ownership whilst diversifying the investor base, the department said.
Reported in conjunction with Bloomberg.