The South African government has allocated ZAR3.8 billion rand (USD212 million) for ailing national carrier South African Airways (SA, Johannesburg O.R. Tambo) (SAA) as well as ZAR164 million (USD9 million) for state-owned South African Express (EXY, Johannesburg O.R. Tambo).
This is according to Kgathatso Tlhakudi, Deputy Director General of the Department of Public Enterprises, who made the announcement during a presentation to the parliamentary portfolio on public enterprises on May 20, reports Times Live.
More money has been set aside for SAA over the next five year medium term, amounting to a total of ZAR9.9 billion (USD542 million), including ZAR4.3 billion in 2021/22 and ZAR1.77 billion for 2022/23.
Finding extra money for ailing state-owned entities has been a challenge as the fiscus is under strain from unplanned spending due to the coronavirus pandemic. The government in April said it will not provide any more funding for SAA, according to business rescue practitioner documents, but continues to bail the airline out and intervene in turnaround strategies and business rescue plans.
SAA has not turned a profit in a decade and received government bailouts worth nearly ZAR20 billion (USD1.1 billion) in the last three years alone. The group’s accounts, as presented to parliament, revealed a pre-tax loss of ZAR5.09 billion (USD274 million) for the year ending 31 March 2019, on revenues of ZAR27 billion (USD1.48 billion).
The carrier had been attempting a path to recovery before the coronavirus pandemic hit, switching its A340 fleet (six A340-200s and four A340-600s) with more economical A350-900s, cutting some loss-making routes from February and starting retrenchments in March. However, these efforts came too late and the coronavirus pandemic has dealt the airline a hard blow, with all scheduled passenger flights halted from the end of March and aircraft being returned to lessors - most recently four A330-200s.
SAA entered business rescue in December 2019. On May 15, the government asked for a business rescue plan to be delivered within 25 days. The business rescue practitioners (Les Matuson and Siviwe Dongwana) have been criticised by chairperson of the National Assembly’s standing committee on public accounts Mkhuleko Hlengwa and Public Enterprises Minister Pravin Gordhan for taking ZAR30 million in fees without producing a plan to save the airline, which is unable to pay the May salaries of its 4,700 staff, according to the business rescue practitioners.
The business rescue practitioners have delayed coming up with a business rescue plan on several occasions over the last five months. Instead, SAA continues to bleed money. The standing committee on public accounts heard that by the end of April, SAA had spent over ZAR9.98 billion (USD550 million), on fuel, salaries, aircraft leases, services from regional carrier Airlink (South Africa) (4Z, Johannesburg O.R. Tambo) and SAA Technical. The business rescue practitioners have said that restructuring the airline could cost an estimated ZAR7.7 billion (USD420 million). Gordhan has previously suggested the possibility of starting a new flag carrier, while liquidating SAA has been proposed as another option.
SA Express, meanwhile, is under provisional liquidation and the allocation of ZAR164 million is mainly to cover liabilities from the early return of leased aircraft, Flight Global reports.
