South African Airways Could Leave Administration By March

A South African minister responsible for the beleaguered state-owned carrier has said today that South African Airways (SAA) may be able to exit administration sometime in February. DPE Director-General Kgathatso Tlhakudi further said that a decision on an equity partner could come as soon as March.

South African Airways Airbus A340-300
SAA has nine Airbus A340s that it can’t sell. Photo: Getty Images

After hemorrhaging money and relying on state aid to survive, South African Airways was placed under local bankruptcy protection in December 2019 and later grounded all its aircraft due to the COVID-19 global pandemic.

Now that an appropriation act has been passed, the Department of Public Enterprises (DPE) said that the remainder of the R10.5bn ($702.4 million) bailout could be given to the business rescue practitioners. Since first awarding the money to SAA in October, only R2.8 billion has been received by the business rescue practitioners due to disagreements with the government on how the money should be spent.

SAA has potential partners

According to Reuters, during the virtual meeting, DPE Director-General Kgathatso Tlhakudi said,

“We are expecting that during the course of this month, the business rescue practitioners should be exiting the business. We have agreed to set up a receivership to take care of the remaining liabilities.”

During its presentation, the DPE said that a plan for South African Airways to resume operations had not yet been agreed upon but that it had received messages of interest from potential partners in working with the SAA Group and its subsidiaries.

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Why does the government want to save SAA?

In November, when responding to parliamentary questions about why the government should continue giving money to a loss-making airline, Deputy President David Mabuza said, according to BUSINESSTECH, that saving SAA would create jobs and contribute to the empowerment of ordinary people.

SAA takeoff
The business rescue practitioners have still not resolved union issues. Photo: Getty Images

He also listed the reasons as to why SAA should be saved. These included:

  • To facilitate international and regional trade through reliable air connectivity in the region, especially the movement of people and goods.
  • Indirect benefits in the supply chain, including food and beverage, retail, business services and more, to further contribute to the economy
  • A direct contribution to the country’s tourism and job creation in the sector
  • Productivity levels are improved across the economy as SAA Technical’s aircraft maintenance provides services to other local airlines that do not have maintenance licensing
  • There is an advancement of the country’s innovation and skills development through SAA’s Cadet Programme, as well as contributing to the advancement of the aerospace industry’s technical capability

Don’t hold your breath

Don’t hold your breath on SAA taking to the skies again anytime soon. When SAA was handed to the business rescue practitioners in December 2019, it had a fleet of 49 aircraft. Of that number, 40 have been returned to lessors leaving SAA with just nine planes. These include five A340-300s and four A340-600s. Unfortunately for the people overseeing the rescue plan, nobody wants the old Airbus planes as they are too expensive to operate.

Union issues still need to be resolved, with three of the airline’s largest unions not amenable to the packages that the business rescue practitioners have put on the table. Then there is a question of leasing newer, more fuel-efficient planes and the routes that will be flown.

South Africa has plenty of private airlines, such as Airlink, keen to take over former SAA routes, if the government would let them. And as far as long-haul international routes are concerned, there are plenty of airlines willing to fly to Cape Town and Johannesburg.

Airlink
Airlink is now the second-largest African airlines. Photo: Airlink

Rushing through the relaunch of SAA while the world is still battling COVID seems to be rather poor timing. Nevertheless, for fans of the airline and potential future employees, news of progress being made will be welcome.

Do you think SAA will be flying again this year? Please tell us what you think in the comments.

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