Creditors have today approved a rescue plan to save loss-making South African Airways (SAA). The South African government now needs to come up with at least 10 billion rand ($596 million) to fund the airline.
A step forward for SAA
As reported by Reuters on Tuesday, SAA administrator, Siviwe Dongwana, informed a meeting of creditors that the plan to rescue the ailing airline had been approved by 86% of voting interests. Mr Dongwana said,
“The practitioners welcome the approval of the business rescue plan with an overwhelming majority of those who voted. It is an important step forward for the airline and provides much-needed certainty towards a restructured SAA.”
For the plan to work, the airline’s fleet will need to be scaled back, and the workforce will be reduced. The airline’s operations will be gradually ramped up as travel restrictions are eased. However, it is unclear where the government is going to find the necessary 10bn rand.
It has already provided more than 20bn rand ($1.1bn) of funding in the last three years. From the beginning of December 2019 to the end of April 2020, over $500m was sunk into the airline to try and keep it afloat.
Mr Dongwana informed the meeting that in line with a deadline stipulated in the plan, the Department of Public Enterprises would be delivering a letter to the administrators with a funding commitment.
SAA plans to become self-sufficient
After entering bankruptcy protection at the end of last year, SAA was required to develop a new strategy. Last month, the company, which has not made a profit for more than eight years, issued the 110-page rescue plan detailing how it would become self-sufficient in the future and move away from its dependence on the government.
Regional airline Airlink, with the backing of several unions, attempted to block the rescue plan. They claimed that the plan would not work and applied to have SAA put into administration. The Department of Public Enterprises, as a majority shareholder in SAA, moved to block the legal action, and the vote on the plan went ahead.