Struggling South African Airways has asked the government for more time to turn the airline around. This third extension is reportedly due to the new challenging market conditions that have decimated the airline industry. Currently, the airline is restricted to flying only domestic shuttle routes between its hub in Johannesburg and Cape Town.
What are the details?
South African Airways has been in financial peril for the last few months. The airline has been plagued by management issues, old aircraft (notably Airbus A340 aircraft it uses to fly long-haul international routes) and aggressive expansion by rivals. Last year, the airline was placed into the care of a business rescue firm run by partners Les Matuson and Siviwe Dongwana.
But, since then, the two partners have asked the government for further extensions regarding their turn around plan. The duo has run into several problems actioning their revitalization of the airline, such as union disputes (being forced to retain expensive engineers) and even the government themselves withholding funds.
But this latest deferral is very much due to outside forces plaguing the industry, with very limited travel options for the airline to make money outside of South Africa. The airline has been restricted from operating regional African routes and international routes to help prevent the spread of the coronavirus, forcing most services to be grounded and just be operating limited domestic capacity.
What have the partners asked for?
The two partners have written an open letter to the government asking for a further extension, as published by CH-Aviation.
“The impact of Covid-19 will not only accentuate the need for urgent cost-cutting measures to be considered, such as possible lay-offs and the introduction of short-time, it may also adversely impact upon the current section 189A restructuring process and will be a matter for further consultation with representative trade unions and other representatives”.
The business rescue practitioners might be forced to take dire action with the airline such as standing down all staff and grounding the fleet if they are ordered to shut down by the government. And if the government is issuing these requests then likely they see it as only fair that they get an extension to save the company.
“It is quite clear that SAA will experience difficulties in completing the plan without having substantially concluded the Section 189 Process with the consulting parties.”
The pair have put together a draft plan for this extension and what might be involved and submitted it to the government. Now it is up to their ‘rivals’ in the public department to oversee their suggestions and approve it. It will also need to be approved by the South African Airways creditors committee and the unions. Certainty an uphill battle for a struggling airline in conditions that the airline industry has never faced before.
What do you think? Is this the right move? Let us know in the comments.