Crunch time for SAA as business rescue runs out of money

The business rescue practitioners (BRPs) of embattled South African Airways (SAA) say the national carrier is in a “dire financial situation” and have set 17 September as a deadline for securing more funds to continue with the process.

They have notified all interested parties that they will on that date announce the progress made in securing the funds. If enough progress hasn’t been made, they will convene a creditors’ meeting on September 18 to discuss the way forward.

In an update on the business rescue process, the BRPs said funding was one of two essential issues they were conluding – the other was the termination of aircraft leases.

Without these two issues being finalised, the business rescue plan could not be implemented, they said.

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Government had already provided R9.3 billion in short-term funding to pay SAA’s creditors. More money was needed but government had undertaken to supply the rest of the necessary funding next week, they said.

It was initially estimated that the business rescue process would cost about R10.3 billion.

“The issue that the BRPs have to deal with at this point in time, concerns the existing funds which are available for operational expenditure, which are near depletion and thus the availability of the requisite funding to the company during the course of next week will determine whether the business rescue proceedings can continue,” the BRPs said.

“Accordingly the BRPs have found it prudent to advise affected persons of the company’s dire financial position.”

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The issue of aircraft leases, which involves the termination of “overly burdensome contracts”, has almost been completed.

The BRPs said termination agreements had been reached for 33 of the 40 aircrafts they had originally leased.
They hoped to finalise the termination of the remaining “onerous” seven leases by the end of the month. If not, they would have to start legal proceedings to cancel them.

Meanwhile, putting more stress on SAA’s already heavily stressed finances, about 3 146 of its 4 600 employees have applied for voluntary severance packages. These include more than half of management; over 600 pilots; two-thirds of cabin crew and almost the entire ground staff, the SABC reported.

According to the business rescue plan, 2 700 workers were earmarked for the voluntary packages at a cost of R2 billion. This means that not all the applications for packages will be approved.

President of the National Transport Movement (NTM), Mashudu Raphetha, told the SABC that the unions were very worried about the situation as they had hoped enough funding would have been secured at this stage.

He added that workers were applying for packages not because they wanted to leave their jobs, but because they and their families needed to survive.

“They are seeing that they have to choose between their survival and something which they know cannot come up. So, it’s about their families; it’s about meeting their financial obligations and the number is overwhelming,” Raphetha said.

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