South African Airways needs State cash next week to survive

The fate of South African Airways (SA, Johannesburg O.R. Tambo) hangs in the balance again with its administrators urgently needing short-term State funding for the business rescue process to succeed. Administrators Les Matuson and Siviwe Dongwana in a statement on September 10, 2020 “found it prudent to advise affected persons of the status of the company’s dire financial position”. They warned that “the existing funds, which are available for operational expenditure…are near depletion and thus the availability of the requisite funding to the company during the course of next week will determine whether the business rescue proceedings can continue”. The administrators need at least ZAR5 billion rand (USD300 million) in working capital, as well as to pay severance packages, and post commencement creditors, before they can discharge the airline from business rescue. “In the ongoing engagements on this issue, Government has continued to express its commitment to making this funding available and have undertaken to do so during the course of next week,” they said. Stakeholders would be advised on September 17, 2020 if the funds had been received, failing which another creditors’ meeting would be convened on September 18, 2020 to consider the way forward. They confirmed the government so far had advanced about ZAR9.3 billion (USD557 million) of ZAR16.4 billion (USD900 million) to repay various lenders, as set out in the business rescue plan. They also confirmed that 33 of 40 aircraft leases had been terminated; and hoped to cancel the remaining aircraft leases by the end of September 2020, “failing which the company will have to institute legal proceedings to cancel onerous aircraft leases”. South Africa’s Department of Public Enterprises (DPE) in response issued a statement saying a decision on the sources of funding would be announced soon. It said DPE and National Treasury, under the guidance of an inter-ministerial committee tasked with overseeing the restructuring of SAA, were working hard to finalise the process.