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SA Airlink wants to sink SAA business rescue proceeding...

Business Maverick


SA Airlink wants to sink SAA business rescue proceedings

South African Airways planes at OR Tambo, Johannesburg, 18 February 2020. (Photo by Gallo Images/Jacques Stander)

Privately-owned airlines are strongly against a final business rescue plan to restructure state-owned SAA and recapitalise it through taxpayer-funded bailouts. FlySafair is unhappy and SA Airlink has approached the High Court to urgently block a pending meeting with SAA creditors to approve the final business rescue plan, and to place the airline under provisional liquidation.

The ongoing restructuring of troubled SAA through a recently-published final business rescue plan is facing more opposition – this time from SA Airlink, a regional airline that is privately owned. 

SA Airlink has approached the High Court in Johannesburg on an urgent basis to block a meeting of SAA creditors that is scheduled for Thursday 25 June for the possible approval of the rescue plan. 

The urgent application, which is expected to be heard on Tuesday 23 June, seeks to interdict the SAA business rescue practitioners – Siviwe Dongwana and Les Matuson – from holding a meeting with SAA creditors to consider the rescue plan, or conducting a vote for its adoption.

SA Airlink also wants SAA, or the rescue practitioners, to hand over copies of all minutes of board meetings and documents from the government (SAA’s sole shareholder) that informed the decision to place the state-owned airline under business rescue. 

SAA was placed under business rescue on 6 December 2019 because it did not have working capital to fund operations. Business rescue, which is provided for in the Companies Act, is an attempt to restructure the affairs of financially distressed companies. It allows a company to continue operating while it is being restructured, saving jobs in the process. 

The final rescue plan 

SA Airlink is owed more than R270-million by SAA, according to the final business rescue plan. SAA and SA Airlink have an agreement whereby the latter’s flight tickets are sold through SAA’s booking systems. And flight ticket revenue that is due to SA Airlink is still outstanding, making it an SAA creditor. 

But SA Airlink and other unsecured creditors won’t be paid in full because the monies owed to them are not backed by government guarantees. Under the final rescue plan, published on 16 June, SA Airlink will receive no more than 7.5 cents in the rand over the next three years.

The final SAA rescue plan was published after many delays. The plan was supposed to be published on 28 February 2020 after an initial extension. Subsequent deadlines were 31 March, 29 May, and 8 June. 

The final rescue plan has proposed keeping SAA as a state-owned airline that will have a reduced workforce of 1,000 after retrenching 3,700 workers, and is expected to operate a full flight schedule of domestic routes – Cape Town, Durban, and Port Elizabeth – from January 2021.

A restructured SAA will still depend on public finances or the taxpayer, as a total of R26.7-billion – of which R10.3-billion is new money – will be required to settle the airline’s debt, fund the restart of its operations, and pay retrenchment packages. 

Read more here: New SAA requires R26.7bn from taxpayers to be airborne

The court application by SA Airlink adds a new twist to the SAA business rescue proceedings, which have been on-going for more than six months. If SA Airlink emerges successful in court, it could delay or sink the SAA business rescue proceedings. 

In the second part of SA Airlink’s court application, it wants SAA to be placed under provisional liquidation, which would immediately terminate business rescue proceedings. 

SA Airlink wants the court to set aside the decision to place SAA under business rescue on the grounds that it had “no reasonable prospects” of being rescued, which is one of the requirements to terminate business rescue proceedings under the Companies Act.

If the court doesn’t set aside SAA’s business rescue proceedings, or place the airline under provisional liquidation, SA Airlink wants the rescue practitioners (Dongwana and Matuson) to be removed. New rescue practitioners would be appointed by the SAA board and the government within 10 days. 

Dongwana and Matuson said they would oppose the SA Airlink application. The Department of Public Enterprises said it would approach the court to intervene in the matter and also oppose the application.

“It is disturbing that a competitor of SAA, which is 100% privately owned, as well as two labour unions, who should be acting in the best interest of their members, are seeking to destroy SAA by forcing a liquidation through the courts. The question is why? Is this really in the interest of SAA workers or the fiscus?” the department said in a statement on Monday 22 June.

The SAA final rescue plan has also sparked fierce opposition from another private airline, FlySafair. The rescue plan proposes a R1-billion bailout of SAA subsidiary, Mango Airlines, because its “financial position and liquidity remains challenging”.

Although Mango is a subsidiary of SAA, it has separate airline operations from its parent company. FlySafair CEO Elmar Conradie believes the bailout of Mango will create unfair competition at a time when other airlines have been hit by the Covid-19 pandemic and are not receiving financial aid from the government. He said if Mango is in trouble, it should go through its own business rescue process – separate from SAA’s. 

Conradie said on Twitter: “So the SAA BR plan is to use the taxes FlySafair pays to bail out its competitor – Mango. If Mango needs R1-billion, then surely they should go into business rescue themselves. Still no support for private airlines. Government should help all airlines.” BM/DM


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