The South African Government says it has withheld the disbursement of Post Commencement Finance (PCF) to South African Express (EXY, Johannesburg O.R. Tambo) after the bankrupt carrier's business rescue practitioners (BRP) failed to present a "comprehensive and feasible" turnaround plan.
Last month, BRPs Phahlani Mkhombo and Daniel Terblanche urged the state-owned carrier's line ministry, the Department of Public Enterprises (DPE), to accelerate the disbursement of ZAR200 million rand (USD12.77 million) worth of funding allocated in South Africa's 2020/21 Budget to cover immediate debts as well as salaries for 1,000+ staff for February.
Flightradar24 ADS-B data shows that as of March 8, SA Express's active fleet has now dwindled to just two CRJ200s and a single CRJ700. Its nine-strong Dash 8-400 fleet has also been inactive since February 28. While a Dash 8-300 has also been wet-leased in from CemAir (5Z, Johannesburg O.R. Tambo) to cover select flights, the bulk of SA Express's network has suffered from mass cancellations. Given delays in the release of funds and a deteriorating operational environment, rumours spread across media last week that SA Express would be forced to suspend all flights from this weekend onwards.
With the prospect of SA Express being purposefully grounded, the DPE issued a statement on March 5 in which it slammed the move given no comprehensive and feasible business case for the immediate stabilisation of the airline had been first presented to its shareholder, the South African government, let alone affected stakeholders such as creditors and employees.
The DPE blasted as "wholly inadequate", a plan presented at a meeting between Acting Director-General Kgathatso Tlhakudi, the DPE's Aviation Division and SA Express's BRPs last week adding that it lacked "key commercial elements" that would enable the Department to make a business case to the National Treasury for the disbursement of the PCF.
"The Department understands that the business rescue process needs the PCF to be fully operational," the DPE statement said.
"However, we have communicated to the practitioners that the Department is engaging with the National Treasury [NT] to seek the PCF either in the form of a government guarantee or cash injection...The Department has impressed upon the business rescue practitioners that the Fiscus is constrained and, notwithstanding the NT, is fully engaged on the matter and understands the severity of the situation. In this regard, if a strategic equity partner (SEP) could be interested in investing in the airline, this option should be vigorously pursued."
The DPE said a further meeting was scheduled for Friday, March 6, and that the revised plan should address the following areas:
- Restructuring options;
- Implications for fleet, routes, existing assets including repairs, staff, regulations and costs;
- Financial model;
- Funding options;
- Branding recovery plan.
Under pressure to protect jobs but at the same time, cut expenditure across its vast portfolio of loss-making state-owned enterprises, the DPE has upheld its belief that SA Express, despite having cost taxpayers ZAR1.2 billion (USD76.7 million) in cumulative losses since 2010, still has a role to play in connecting secondary routes and key cities in the Southern African region.
To that end, the BRPs have pledged to draft a revised plan that devolves "some" operational and strategic responsibilities to SA Express's management and board.
