JOHANNESBURG (Reuters) – South African Airways (SAA) has a reasonable chance of being saved from collapse, the specialists appointed to turn around the state-run carrier said on Friday.
A South African Airways (SAA) aircraft is pictured after landing at Cape Town International Airport in Cape Town, South Africa December 9, 2019. REUTERS/Sumaya Hisham
Les Matuson, the business rescue practitioner charged with assessing the prospects of SAA and 10,000 related jobs, said he and his team considered a rescue to be the preferable option.
He said there was a “reasonable prospect” of a successful business rescue notwithstanding the inevitable risks and challenges.
“(We)…are of the belief that the business rescue process will achieve a better outcome for all stakeholders than an immediate liquidation,” he said in a statement.
A spokeswoman for SAA declined to comment.
Earlier this month the government put SAA into business rescue – a form of bankruptcy protection where a specialist advisor takes control of a company to restructure it – after a strike exacerbated financial problems and left it at risk of going bust.
The national carrier is one of several state entities that are deeply in the red after nearly a decade of mismanagement and corruption, the most troubling of which is state power company Eskom.
SAA’s case was seen as a test of President Cyril Ramaphosa’s resolve to carry out badly-needed economic reforms. Ramaphosa this month promised “drastic action” to turn around cash-strapped and highly indebted state firms.
“SAA leases most of the aircraft and accordingly in a liquidation, there will be limited assets which can be realized for distribution to creditors,” the rescue specialists noted in their statement.
NOT CLEAR OF RUNWAY YET
While their decision is a vote of confidence in SAA – once Africa’s biggest airline and a former source of patriotic pride – its future remains unclear, as does how many jobs can be saved.
It has not made a profit since 2011 and has received more than 20 billion rand ($1.4 billion) of government bailouts over the past three years.
Matuson said creditors had approved an extension to the deadline to present a plan for SAA’s rescue until the end of February next year.
Before it is finalised, employees and creditors will need vote on the plan. Any cuts to jobs or wages could prove sensitive.
Mashudu Raphetha, president of the National Transport Movement, which represents SAA workers, told Reuters the union had met with the rescue practitioners.
“We remain optimistic of a positive outcome, in these trying times,” he said.
Phakmile Hlubi, spokeswoman of the National Union of Metalworkers of South Africa, the other SAA union that went on strike last month, confirmed they had also met with the rescue experts but gave no further comment.
Some analysts had questioned the affordability of a 4 billion rand lifeline stumped up by government in order to launch the rescue plan.
A spokesman for the bureau of public enterprises declined to immediately comment.
Writing by Tim Cocks; Editing by Angus MacSwan and Elaine Hardcastle