South African Public Enterprises Minister Lynne Brown has confirmed that South African Express (EXY, Johannesburg O.R. Tambo) was last month forced to ask its main shareholder, the South African government, for help in repaying loans to two financial institutions.
Addressing the country's parliament on Wednesday, March 8, Brown said as the airline continues to face profitability and liquidity challenges, it has been unable to fulfil its debt payment obligations. It, therefore, turned to government when it found it would not be able to meet a February 24 deadline for the repayment of ZAR150 million (USD11.3 million) to Rand Merchant Bank (RMB) and Nedbank.
"[The] DPE [Department of Public Enterprises] supported the SOC [State-owned Company] to renegotiate with RMB and Nedbank to pay the banks [a] reduced amount of ZAR58 million (USD4.38 million) and the rest through installments based on a proposed repayment profile supported by financial projections until January 2018 to be submitted by SAX [South African Express]," she said.
Had this agreement not been reached, the guarantee provided by government would have been triggered, requiring full payment within thirty (30) business days.
Brown highlighted the poor state of affairs at South African Express noting that many of it aircraft are currently grounded thereby requiring the costly wet-lease of outside aircraft (at present one Fokker 70 leased from Golden Wings Aviation (South Africa) and one E145 from Solenta Aviation) to meet demand.
Last year, Chief Executive Officer (CEO) Inati Ntshanga told African Aerospace his airline was close to finalizing a deal for the lease of twenty unspecified 90-seater aircraft to renew and replace its in-house fleet of ten CRJ200s (of which four are parked), two CRJ700s (of which one is parked), and ten Dash 8-400s (of which three are parked).
However, Brown noted in her speech that while government had received a Public Finance Management Act (PFMA) application for South African Express's fleet renewal scheme, it has not been approved on the grounds that it does not address DPE requirements regarding required numbers of aircraft.
Brown said the best possible solution to not only South African Express's perennial woes, but also those of South African Airways (SA, Johannesburg O.R. Tambo), was the consolidation of the two airlines, along with Mango Airlines (MNO, Johannesburg O.R. Tambo) and a 2.5% stake in Airlink (South Africa) (4Z, Johannesburg O.R. Tambo), into a singular holding company. Once established, the firm would then offer a 25% stake to a willing strategic partner.
