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Leaked Document States South African Airways Bailout Agreed

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Leaked Document States South African Airways Bailout Agreed

Leaked Document States South African Airways Bailout Agreed
June 01
09:40 2020

LONDON – In a dramatic twist of events, a leaked email from South Africa’s opposition party has stated that a new bailout has been agreed upon by the state for the country’s struggling airline that was placed into administration in December 2019.

The announcement today follows a dramatic U-turn in the future of the airline following months of the South African government refusing to bail the carrier out, which at the time seemed like it would not last the coming months.

A South African Airlines jet taxis down the runway June 14, 2008 at Washington/Dulles International Airport in Dulles, Virginia. / AFP PHOTO / KAREN BLEIER

The airline has failed to make a profit since 2011 and has relied on the government bailout funds to keep it going over the last nine years. What followed over that time was a dramatic and fast-planned restructuring that unfortunately did not have the desired effect to save the carrier from liquidation.

Part of the restructuring plan that the company went through was the retirement plans for its ageing A340 fleet and the leasing of the news Airbus flagship aircraft the A350XWB; part of the changes brought into the carrier also saw it cut ties with the unions that represent its staff.

The airline announced back in April that it was setting up to lay off 4,700 workers as part of cost-cutting measures in a final attempt to save the airline.

While there has been no official confirmation made about the details of the leaked email, it states that the government would be happy to provide funds for a bailout of the airline following the laid out plans of restructuring that have been presented to the carrier in a draft document.

Photo: Julian Herzog

The document has listed a complete breakdown of the new SA that will see the airline moved to be controled by a holding company called “New HoldCo” that the document states will also oversee the running of SAA City Centre, SAA Technical, air Chefs and Mango Airlines (JE).

It is believed that the South African government has “agreed to” provide the funding for the following steps towards recovering the airline: 

ITEMCOST ‘billion
Working capital injection to restart the airline post Covid-192
Retrenchment of Employees2
Payment of Lenders16, 4
Payment of the General Concurrent Creditors0,6
Total21 rands

Should this draft plan go ahead, it would be of the largest government-funded airline restructures ever to be undertaken; however, with no official announcements made from the government at this time, the leaked document and information is nothing more than speculation.

The document goes on to state that the new company would go on to make a loss of R19.9b over the next three years but it did show that there would be a steady decline in the amount of loss the company makes each year, with the plan to have the company just under half its yearly loss by year three.

A break down on the year by year loss forecasts:

  • Year 1 – R8,1 billion loss
  • Year 2 – R7,5 billion loss
  • Year 3 – R4,3 billion loss

Without a formal confirmation, it will be hard for the future of SA, but what is clear is that this draft document is not going to be a guarantee that the airline will survive. 

It goes on to say that there can be no forecast for accurate cash injections in a post-COVID-19 world with carriers around the globe struggling to survive and making cuts in staff and fleet size where they can.

As the viability of the proposed plan is uncertain until an official announcement and confirmation are made, the question will always be, is it too late for the stolen airline that has not made a profit since 2011? 

Or is a post-COVID-19 world the perfect place for a struggling airline to once again find its footing on the global market?

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About Author

Tomos Howells

Tomos Howells

I am an aviation fanatic and have been from a young age. From the first time I walked onto a plane I was sure in my mind, there was no other career for me, I am now working on my flight instructor's rating while working for the amazing team of Airways Magazine as an online contributor.

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