A South African Airways aircraft on the apron of Frankfurt Airport in 2018.
Silas Stein/picture alliance via Getty Images
- A majority of SAA creditors have voted to postpone a meeting to vote on the proposed rescue plan.
- Rescue practitioners argue this places the airline at risk, as the plan proposes a deadline for government funding.
- If the plan is not adopted, or if it is adopted and the practitioners cannot raise sufficient funds, a call will have to be made on whether the rescue process can continue.
A majority of creditors of South African Airways (69%) voted on Thursday to postpone a meeting to vote on a proposed rescue plan until 14 July.
This was despite the business rescue practitioners arguing that delaying the meeting could have a detrimental impact on the airline, because the plan gives 15 July as the deadline for government to come up with about R10.3 billion in funding to prevent SAA from having to be liquidated.
A number of creditors, including three unions, namely the National Union of Metalworkers of South Africa (NUMSA), South African Cabin Crew Association (SACCA) and the SAA Pilots Association (SAAPA), requested an adjournment as they wanted more time to propose a better plan and to engage with government to get the commitment for funding.
Since Finance Minister Tito Mboweni did not allocate any funds for SAA in his supplementary budget on Wednesday, funding would likely have to come from a private investor.
The proposed plan has the support of government from a funding perspective. However, should there be a requirement to amend the plan, this could impact the funding aspect. According to the practitioners, the R10.3 billion funding the plan foresees is already at the threshold government can consider raising.
The plan includes R2 billion to get the airline operational again; a dividend of 7.5 cents in the rand to concurrent creditors (total of R600 million); keeping 1 000 of the 4 700 employees; paying severance packages to employees not being retained (R2.2 billion); paying post-business rescue commencement creditors (R800 million); paying about R1.7 billion to lessors; and paying for unclaimed outstanding tickets (R3 billion).
Local banks hold government guaranteed loans of R16.4 billion already allocated in prior national budgets.
What if the plan isn’t adopted?
If the plan is not adopted and there is no amended plan adopted; or if the plan is adopted but government cannot raise the money; it will result in the practitioners having to make a decision on whether a rescue plan has now become unimplementable and if they should “discharge” the rescue process. This could ultimately mean liquidation of the airline.
The practitioners explained that, once the plan is adopted, the requirements would have to be fulfilled, the most important of these being funding. If funding is obtained in time, then a retrenchment process of employees not accommodated as part of the plan will have to commence.
Various steps for the renewal or restructure of the airline will then follow, according to realistic timelines – given the impact of the Covid-19 pandemic on the airline industry.
The national airline went into business rescue in December last year, following years of losses and repeated state bailouts. The business rescue practitioners published their rescue plan earlier in the month after repeated delays.
SAA’s financial losses totalled more than R10 billion over the past two years, according to documents submitted to Parliament earlier this year. Over the past decade, the government has bailed out the airline with almost R30 billion.
