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South Africa

Public Enterprises Ministry urges creditors to back SAA rescue plan

Rescue practitioners Siviwe Dongwana and Les Matuson have been criticised by Public Enterprises Minister Pravin Gordhan for the R30-million in fees they have invoiced since SAA was placed under business rescue. (Photo: Gallo Images / Jacques Stander)
By Reuters
24 Jun 2020 0

JOHANNESBURG, June 24 (Reuters) - South Africa's public enterprises ministry on Wednesday urged creditors to back a restructuring plan for South African Airways (SAA), saying it was the only way to rescue the loss-making airline.

Creditors are due to vote on the plan on Thursday, but one of the creditors – private airline Airlink – is in court on Wednesday trying to prevent the vote from happening.

State-owned SAA’s administrators published the proposal last week after repeated delays and months of wrangling.

The government has applied pressure on the administrators to salvage SAA even though it has not made a profit since 2011 and has relied on bailouts.

The Department of Public Enterprises (DPE) said in a statement: “DPE believes the ​approval of the business rescue plan ​would help creditors and employees to be co-creators of a new airline.”

The rescue plan proposes the government finds at least 10 billion rand ($577.6 million) in new funds to restructure SAA, pay off some creditors and fund layoff costs. It also envisages scaling back the airline’s fleet while keeping most of its domestic and international routes.

Trade unions have voiced their opposition because of the thousands of job cuts the plan entails.

DPE sent a voluntary severance package offer to unions on Tuesday in a letter seen by Reuters, saying the restructuring could cost 3,620 jobs.

It said the offer, which includes one week of severance pay per year of service, one month of paid notice and a potential top-up payment, was final and agreement was important to avoid liquidation.

It is not yet clear where funding for a restructured SAA would come from.

The DPE said on Tuesday it had received unsolicited proposals from private sector funders, private equity investors and potential partners.

Finance Minister Tito Mboweni is scheduled to deliver an emergency coronavirus budget later on Wednesday and could announce more government funding for SAA.

($1 = 17.3127 rand) (Reporting by Alexander Winning; editing by Olivia Kumwenda-Mtambo and Barbara Lewis)

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