SA Government Could Bail Out National Airline to the Tune of $1.2-Billion

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The administrator’s running South Africa’s embattled national airlines SAA propositioned the government to provide a R21-billion ($1.2-billion) bailout to help repay debt and resume operations after COVID-19 travel bans are lifted.

This new plan includes about R17-billion that will go into repaying South African Airways creditors, according to Bloomberg. Afterwards, as much as R2-billion will be provided for working capital to get operations back and running.

The draft plan “is for discussion purposes only and we await comment from the affected persons,” a spokeswoman for the administrators says, adding that the team has until 8 June to finalize a rescue proposal.

South Africa’s Public Enterprises Ministry, which is responsible for SAA, has not yet discussed the draft plan, spokesman Sam Mkokeli says. The National Treasury reported earlier this year it would allocate funds to repay creditors as the airline’s debt is government guaranteed.

While the funding agreement is yet to be finalised, a deal of this nature and magnitude would finally bring an end to the impasse between South Africa’s government and SAA’s business rescue team over the future of the failing enterprise.

The administrators, appointed in December, had an earlier request for state funding rejected in April and subsequently proposed firing the entire workforce to stave off liquidation.

Public Enterprises Minister Pravin Gordhan strongly objected to that plan, and announced his ambitions for the creation of a new airline at the start of the month, kicking off a fresh round of talks.

SAA’s commercial planes have been grounded since late March, at the onset of the nationwide lockdown in South Africa due to the COVID-19 pandemic. The government had closed borders for non-urgent travel to contain the coronavirus.

Some domestic flights are being allowed to operate as of Monday for business purposes, though SAA had previously reduced its local services to a single Johannesburg-Cape Town route.

Edited by Luis Monzon
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