SA Express Business Restructure Effort Facing Hurdles

SA Express, the regional carrier for South African Airways, is facing some problems with its efforts to restructure. The firm hired to rescue the business has accused the government (who is also their employer) of meddling with their efforts, preventing life-saving company restructuring.

SA Express Business Restructure Effort Facing Hurdles
Plans to fix the airline have been derailed. Photo: Alan Wilson via Wikimedia Commons

What are the details?

SA Express is a regional carrier owned and operated by the government of South Africa. It has a fleet of 24 aircraft (mostly Bombardier CRJ200s and Q400s) and flies to nine destinations, including three outside of South Africa.

However, much like the fellow government airline South African Airways, the carrier has been facing some tough times. It went into court-appointed administration back in February 2020. It is struggling to pay wages and has missed so many airport fees that it got banned from its own hub airports. 

The airline had been under operated by Ziegler SA, who informed the government that they were unable to continue operations without help.

But these plans to return the airline back to form have fallen off the rails, and the blame game has begun.

What is the conflict?

According to the Daily Maverick, the firm hired to do the administration and save the company has “been met with open hostility and aggression in their engagements with the department.”

The rescue firm, led by partners Phahlani Mkhombo and Daniel Terblanche, has come into conflict with the SA government Department of Public Enterprises, who oversees the operation of SA Express.

Apparently the department went behind the rescue firms back and asked Ziegler SA to withdraw the request for court-appointed administration as there was a conflict of interest.

“The department was of the view that they (the appointed business rescue practitioners), could not be trusted as they were nominated by the applicant (Ziegler SA), and therefore not independent. This was met with firm resistance by the applicant creditor (Ziegler SA),” Mkhombo and Terblanche said in a report discussed by Business Maverick.

SA Express Business Restructure Effort Facing Hurdles
SA Express is caught in the middle. Photo: Bob Adams via Wikimedia Commons 

The government department has also suspended funding

To make things worse, it seems that the government agency could have influenced the national treasury to hold off delivering essentially bailout money (in the region of R438-million or $27.3 million USD) to the airline. This money was earmarked to pay the wages of the airline employees in March, and without this budget, the airline may not be able to operate.

The two partners at the rescue firm have repeatedly requested to meet with the department to resolve these conflicts, but so far the government has not been able to come to the table. Additional third party consultants have all recommended that the partners be retained to save the airline, but their opinions seemed to have fallen on deaf ears.

SA Express Business Restructure Effort Facing Hurdles
SA Express might not be able to operate without wages for staff. Photo: Bob Adams via Wikipedia

“It became apparent that the department was determined to frustrate the BRPs [business rescue practitioners] and the greater business rescue process after failing to persuade the applicant creditor (Ziegler SA), to remove the BRPs or alternatively withdraw the business rescue application and/or ambush the BRPs at the first meeting of creditors by getting creditors to vote against the ratification of the BRPs.” – claimed the two partners in the original article.

So far, the government department causing all this drama has yet to release an official statement. But with around 691 SA express team members set to go unpaid in March we hope that they can clarify their actions soon.

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