South African Airways Rescue Plan Approved

Creditors have today approved a rescue plan to save loss-making South African Airways (SAA). The South African government now needs to come up with at least 10 billion rand ($596 million) to fund the airline.

South African Airways SAA
South African Airways rescue plan has been approved. Photo: Getty

A step forward for SAA

As reported by Reuters on Tuesday, SAA administrator, Siviwe Dongwana, informed a meeting of creditors that the plan to rescue the ailing airline had been approved by 86% of voting interests. Mr Dongwana said,

“The practitioners welcome the approval of the business rescue plan with an overwhelming majority of those who voted. It is an important step forward for the airline and provides much-needed certainty towards a restructured SAA.”

For the plan to work, the airline’s fleet will need to be scaled back, and the workforce will be reduced. The airline’s operations will be gradually ramped up as travel restrictions are eased. However, it is unclear where the government is going to find the necessary 10bn rand.

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It has already provided more than 20bn rand ($1.1bn) of funding in the last three years. From the beginning of December 2019 to the end of April 2020, over $500m was sunk into the airline to try to keep it afloat.

Mr Dongwana informed the meeting that in line with a deadline stipulated in the plan, the Department of Public Enterprises would be delivering a letter to the administrators with a funding commitment.

SAA plans to become self-sufficient. Photo: Getty Images

SAA plans to become self-sufficient

After entering bankruptcy protection at the end of last year, SAA was required to develop a new strategy. Last month, the company, which has not made a profit for more than eight years, issued the 110-page rescue plan detailing how it would become self-sufficient in the future and move away from its dependence on the government.

Regional airline Airlink, with the backing of several unions, attempted to block the rescue plan. They claimed that the plan would not work and applied to have SAA put into administration. The Department of Public Enterprises, as a majority shareholder in SAA, moved to block the legal action, and the vote on the plan went ahead.

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SAA will update its fleet and streamline its routes. Photo: Getty Images

The airline will update its fleet

As part of its commitment to the future, SAA plans to emerge from the coronavirus crisis by focusing on its domestic routes before moving on to international destinations. The airline will also update and strengthen its fleet.

From July to February 2021, it is prioritizing the addition of six narrowbody aircraft. By December 2021, it aims to have 26 aircraft with 19 narrowbody and seven widebody planes serving 27 destinations around the world.

In its attempts to streamline its operations, SAA will drop some of its international destinations such as Guangzhou, Hong Kong, Munich, and Sao Paulo. In addition to its domestic and regional routes, it will offer five international services to Frankfurt, London, New York, Perth, and Washington D.C.

The restructured national carrier aims to be operating a full domestic network and schedule from January 2021.

Do you think SAA can change its ways and survive without needing constant government funding? Let us know in the comments section below.