Struggling South African Express has been given a lifeline from the South African government in the form of a $20 million USD cash injection. This money will go towards operating capital and paying back creditors.
Who is South African Express?
For those not in the know, South African Express is a regional carrier in South Africa founded in 1994. They have a fleet of 22 aircraft, all from Bombardier (Specifically 10 CRJ200s, 2 CRJ700s, and 10 Dash 8-Q400s). They fly from their hubs of Johannesburg and Cape Town to destinations around South Africa, as well as neighboring countries Nambia, Botswana and the Democratic Republic of Congo.
Even though the airline is government-owned much like South African Airlines, it is actually operationally independent and only codeshares a few routes with its bigger international brother.
However, the airline’s operations have not entirely been without incident. In 2018, the airline was grounded over safety concerns, and the company books have gone unaudited for several years (and are the cause of much debate in the South African parliament).
Why are they struggling?
Now, this is where things get a little fuzzy. All we know is that the airline operates at a loss and has been doing so for many years. Whether that is from operating unprofitable routes (which might actually be a government service in its own right if other operators don’t want to link distant towns), or through competition or corruption could be disputed. However, that is beyond the scope of this article.
On the 2nd of this month, interim Chief Executive Officer (CEO) Siza Mzimela listed some of the challenges facing the airline to CH-Aviation.
“[A] weak balance sheet, frozen credit lines, liquidity challenges, long outstanding debt, and a significant monthly cash bill.”
As reported by CH-Aviation, the airline has been unable to get any loans from banks or other lenders unless backed by the South African government, which so far has not been willing to do so. The government believes that a better solution would be for the airline to merge with South African Airways and fellow airline Mango (another state-owned airline operating in the low-cost-carrier space) and then for the whole lot to be privatized.
Why did they get a cash injection?
However, this all changed earlier this week when the airline was given approval for a massive cash injection of 300 million ZAR (Around 20.5 million USD) from the government. This is in addition to the operating budget of 1.2 billion ZAR (82 million USD) the airline receives every month.
“These funds were provided from a contingency reserve which was revised upwards to respond to possible requests for funding from state-owned enterprises as per the announcement made during the February 2019 budget speech,” – Statement from the South African Treasury
It is believed that these funds will be used for operating capital and to help pay back outstanding debts.
What do you think? Should the South African government give the airline such a big amount of cash? Let us know in the comments.