SAA to exit administration in mid-1Q21 says gov’t

The South African government expects South African Airways (SA, Johannesburg O.R. Tambo) to exit administration at the end of February and could make a decision on a strategic equity partner for the flag carrier by the end of March. This is according to a presentation on February 3 by South Africa’s Department of Public Enterprises (DPE), SAA’s shareholder representative, to a virtual meeting of the country’s Parliamentary Portfolio Committee on Public Enterprises. DPE said while a plan for SAA to resume operations had not yet been finalised, the balance of a ZAR10.5 billion rand (USD702.4 million) state bailout could now flow to the airline after President Cyril Ramaphosa on January 20 signed an Adjustments Appropriations Bill releasing the funds from the National Treasury. So far ZAR3.5 billion (USD233.9 million) had been made available, of which ZAR2.8 billion(USD187.1 million) had been transferred to the airline, the presentation showed. “Every opportunity will be taken to save as much cash as possible,” parliamentarians were told. Conditions for a Receivership, which would allow for the airline to exit from business rescue, are expected to be finalised by the end of February. This follows the appointment of an interim Board on December 9. “We are expecting that during the course of this month the business rescue practitioners should be exiting the business,” DPE Director-General Kgathatso Tlhakudi said. “We have agreed to set up a Receivership to take care of the remaining liabilities,” he added. Once a resumption plan for SAA has been agreed to, it will be communicated to all stakeholders. With key source markets for international passenger traffic being restricted at present because of COVID-19, it is likely the focus will be on enabling SAA’s low-cost subsidiary Mango Airlines (JE, Johannesburg O.R. Tambo) to retain its domestic and regional market share; and for SAA to focus on cargo opportunities. The DPE and its transaction advisor Rand Merchant Bank produced a shortlist from 30 plus expressions of interests received for strategic equity investments in the SAA Group and its subsidiaries Mango, SAA Technical, and Air Chefs. The shortlist had been presented to the SAA Board for their consideration and advice, and a decision would be made before the end of the 2020/21 Financial Year (end of March 2021). A total of 3,163 of 3,250 applications for voluntary severance packages worth ZAR2.8 billion (USD187.1 million) have been processed. The first tranche for staff will be paid on February 12, with a second tranche for management on February 19. Answering questions from parliamentarians, Public Enterprises Minister Pravin Gordhan confirmed he and the department would meet with the Board “in the next 24-48 hours to conclude how we process this (the shortlist of potential strategic equity partners)”. He declined to disclose who was on the shortlist. The Minister gave his assurance that “as much as possible of the ZAR10 billion should be saved” for other deserving government spending, as the allocation for SAA was diverted from other state departments. Gordhan said matters for the administrators to conclude now include the reconciliation of monies due to creditors and employees, which, he criticised, should have been done already since the business rescue plan was approved in mid-2020. The administrators will also set up a Receivership, which would have to be approved by the creditors before SAA could exist from administration. Responding to criticism of millions of rand in fees paid to the administrators, Gordhan suggested that amendments should be made to South Africa’s Companies Act to compel administrators of state-owned companies to be accountable to the state, and not just to a court of law, for the fees they charged. He said the interim SAA board would be in place for the next few months, but neither the Board nor the shareholder, had any control over SAA as long as the administrators remained in place. A gradual transfer of control has been discussed with them since last year. Gordhan said he would have liked SAA as the flag carrier, and not a foreign airline, to have transported vaccines to South Africa.