South Africa: SAA to use incoming capital to boost its subsidiaries

SAA to use incoming capital to boost its subsidiaries. [Image: Courtesy]
SOUTH AFRICA — State owned carrier SAA (South African Airways) is set to share a proposed transfer of R2.7 billion with its subsidiaries in a move aimed at boosting its financial position as it goes through a recovery process following its business rescue.

SAA which was put into business rescue in December 2019 was allocated a R10.5 billion bailout to cover its business rescue process which it concluded in April.

While speaking to parliament, DPE (Department of Public Enterprises) acting director- general Melanchton Makobe said the airline’s subsidiaries were facing monetary challenges as a result of the rescue process.

DPE added that the success of SAA’s business rescue plan depended on its subsidiaries’ financial and operational health.

Makobe also added that the global Covid-19 travel restrictions had an impact on SAA subsidiaries’ operations.

“If you look at the business rescue plan, it recognises the deteriorating financial position of subsidiaries and indicates that the success of the business rescue plan is dependent on the financial viability of subsidiaries,” he said.

According to Makobe, SAA Technical would receive R1.6bn to cover its restructuring and right-sizing.

SAA has seen a decline in its revenue thus it has not been able to cover fixed monthly costs and payment of salaries.

Low-cost carrier Mango would receive R819 million to help with restructuring, paying off debt as well as providing working capital.

Mango’s cash inflow is currently less than cash outflow, and is therefore deferring payments to meet critical payments. Air Chefs would receive R21m for restructuring following continued losses as revenue remains insufficient to cover costs.

According to DPE Deputy Minister Phumulo Massuale, which is in final discussions with a strategic equity partner will sign an agreement within the next eight weeks.

“That process is near the end right now,” Massuale said. “Due diligence has led us to the point where we can say in the next six to eight weeks that the process will be concluded.” Said Massuale adding that an announcement will be made once the process was finalized and the preferred strategic partner was identified.