SAA to go under urgent business rescue

South African Airways must urgently be placed in business rescue, President Cyril Ramaphosa has ordered.   

In a leaked letter, secretary of cabinet Cassius Lubisi said Ramaphosa issued the instruction because of the “dire situation” facing the embattled national carrier.

“This is the only viable route open to the government to avoid an uncontrolled implosion of the national airline,” the letter reads.

“The voluntary business rescue approach will also prevent liquidation applications by any of SAA’s creditors, which would land the airline in an even worse position.

“We remain seized with the SAA crisis and will keep members of the executive informed at all material times.”

Presidency spokesperson Khusela Diko confirmed to TimesLIVE that the letter was official correspondence to members of the cabinet and deputy ministers.

“It is extremely unfortunate that this correspondence would have made its way into the public domain in this manner, as it undermines the very processes under way to deal with the very dire situation at SAA,” she said.

Business rescue aims to facilitate the rehabilitation of a company that is financially distressed by providing for the temporary supervision of the company and management of its affairs by a business rescue practitioner.

The announcement comes just days after public enterprises minister Pravin Gordhan said the airline needed to go through a “radical” restructuring process to ensure its financial and operational sustainability.

“In pursuance of this, various options are being explored. SAA therefore cannot continue in its current form,”  Gordhan said on Sunday evening.

Before this could happen, he said, SAA needed to get funding to keep the business running.

“Over the past few days there has been an intense discussion with lenders to secure the necessary funds to cover the operational and structural transition over the next few months.”

The DA welcomed Ramaphosa’s decision, saying it had always held the view that business rescue was the most viable option for the airline — other than liquidation or stopping bailouts.

“It is very unlikely that the application for business rescue for SAA will be conceded to, unless there is a further bailout, presumably amounting to R2bn, from the South African taxpayer in order to provide the working capital required to enable SAA to continue trading,”  the party said in a statement.

The DA said if business rescue was approved, control of SAA would be taken out of the hands of the ANC.

“The business practitioner who is appointed must take robust action to immediately cut costs at SAA without any interference from the ANC.

“The DA will monitor this very closely in order to ensure that the ANC keeps its distance.”

The party warned that business rescue would come with an obligation for government guarantees of R19.1bn to be honoured.

This would require an increase in sovereign borrowings, which in turn would increase debt service costs and place a further burden on taxpayers. — TimesLIVE, with additional reporting by BusinessLIVE