Rescue practitioners long involved in keeping South African Airways (SAA) afloat have been given 25 days to formulate a new business plan. The strict deadline comes after the Standing Committee on Public Accounts (SCOPA) deemed their draft rescue plan as unsatisfactory.
The carrier entered bankruptcy protection in December 2019. After five months of business rescue efforts and spending a whopping $539m along the way, the standing committee is starting to feel the heat. SCOPA has also put in a request for a complete schedule of fees from the rescue practitioners.
Final chance for practitioners
According to FlightGlobal, committee chairman Mkhuleko Hlengwa expressed discomfort with the business proceedings thus far and appealed for “more interaction” between parties. A draft rescue plan submitted to the committee via an online meeting on May 5th was not up to standards.
“The more they provide answers, the more questions arise. It’s a case of classical musical chairs and characterized the operation over the past five months. It’s what has landed us with a R10 billion bill.”
Member of Parliament Bernice Swarts is also unhappy with the numerous extensions, and questions the authenticity of the hired practitioners.
“They never had the intention of rescuing SAA at all. Because today when they give us their finances, [rescue practitioners] are not telling us how much they are paying themselves or how much they are paying the consultants,” noted the African National Congress MP, as reported in EWN.
With doubts surrounding their competency, the rescue practitioners now have one final chance to keep SAA from bankruptcy. Further, SCOPA members will submit any questions they have to the practitioners and must receive responses by May 26th. Rescue practitioners will have until mid-June to come up with a formal business plan to rescue SAA.
Rescue efforts started in December
The rescue practitioners, who have no form of aviation experience, started work on saving SAA back in December. Analysis and presentations began in January 2020, where the practitioners obtained a $2.7m loan from the South African government.
Initially, the practitioners had to propose a business plan by the week of March 16th. During this, the practitioners implemented various cash-management initiatives.
Amid flight suspensions and restructuring by the government, practitioners failed to provide a business rescue plan. By April 2020, the committee instead saw an increase in the expenditure by the rescue team, amounting to $500m. At that point, there was still no progress in a concrete plan to save SAA.
“In terms of the amount of money that has been utilized… by the airline from December 5th to the end of April, we indicate that the total spend was 9.9 billion Rand,” as mentioned by practitioner Siviwe Dongwana, in Reuters.
What might be in store for SAA?
The troubled airline has not made a profit since 2011 and to date received government bailouts amounting to $1.6bn.
The unprecedented virus outbreak has also done nothing to help the situation. In April it was revealed that almost 5,000 SAA employees are in danger of losing their jobs amid struggles to weather the pandemic. Currently, however, South Africa’s Labor Court has halted the layoffs.
Furthermore, with no future government funding, South African Airways could be facing liquidation sometime soon. Plans seem to be underway to form a new airline in its place. Not everyone is on board, though, as FlightGlobal reports, the government opposition warns that another state-owned airline is not the answer.
According to the Democratic Alliance, “The South African taxpayer does not deserve to be saddled with another state-funded airline when the evidence clearly shows that it will also be another fiscal drag just like its predecessor.”
Simple Flying reached out to SAA for comment but did not hear back before publication.
What do you think about SAA’s move to push its practitioners to come up with a rescue plan? Do you believe SAA will be able to survive? Let us know your thoughts in the comments section.