We’ve reported extensively on South African Airways and its financial challenges in the last few months. But it’s regional partner SA Express is also badly in need of a financial lifeline, as reports have surfaced to suggest it may not have the funds to pay employee salaries beyond February 2020.
In need of government assistance
According to South African media outlet Daily Maverick, SA Express has its own team of business rescue practitioners (BRPs) working to turn the carrier around. These BRPs have reportedly asked South Africa’s Department of Public Enterprises for funds to pay salaries beyond February 2020 as it is bankrupt. Interestingly, this government department fully oversees the operations of SA Express as it is a state-owned airline.
South Africa’s Minister of Finance, Tito Mboweni, had allocated R200 million (US$12.81 million) to the airline for 2020/21 in the budget. However, this money has yet to be transferred to the airline. This could affect as many as 1,000 employees of the airline. However, as the airline has yet to receive the funds, there also seems to be doubt regarding the government’s willingness to actually keep the airline afloat. This rings especially true after recent remarks made by the Finance Minister:
“[The government will] need to assess its appetite for continued ownership” -Tito Mboweni, SA Minister of Finance
Daily Maverick reports that the airline has previously said it needs R164 million to remain operational for this upcoming fiscal year. This is the equivalent of US$10.5 million.
Over the past two years, SA Express has received a number of government bailouts amounting to R1.5 billion (US$96 million). This is because the airline has not been profitable for some time. In fact, the airline lost R591 million (US$37.84 million) in 2019 – three times as much as 2018.
As a result, the airline has had to be put under a business rescue plan – just like its mainline affiliate South African Airways. This had to be done as a former creditor is still owed the equivalent of US$700,000 and has filed legal action to recover what it is owed.
Below is a partial list of other creditors who are owed money by the airline:
- Transnet (R260 million)
- Rand Merchant Bank (R14.4 million)
- Flyfofa Airways (R18 million)
- Mothebe Shuttle Services (R1.5 million)
- African Charter Airlines (R14 million)
The total amount owed to creditors is reported to be R2.7 billion, or US$173 million. However, these numbers, provided by business rescue practitioners, are being challenged by the airline. Airline board chairman Tryphosa Ramano says company debt has been reduced over the past 18 months and “currently sits well below R1 billion”.
Do you think the government will be able to step in and fill the gap? Or will it decide to abandon the airline? Let us know what you think by leaving a comment.
We’ve contacted SA Express with a request for comment. At the time of publishing, we have not received any response. However, we will update this article if any new information is received.