New airline to cost government R21bn

The road to a new South African Airways (SAA) will cost the government an estimated R21 billion, according to a leaked draft business rescue plan compiled by rescue practitioners Siviwe Dongwana and Les Matuson. 

According to the plan, the airline’s restructuring will require an initial capital injection of R2 billion. 

Employee retrenchments packages are expected to come in at another R2 billion but this would not have to be paid immediately, with the rescue practitioners saying arrangements will be made with employees to defer the payment until the government provides an appropriation for the amount, or a strategic equity partner provides a cash injection to cover it.

An amount of R16.4 billion will go towards payment of SAA’s lenders and a minimum of R600 million will be needed to pay the general concurrent creditors. 

In the February budget Minister Tito Mboweni already set aside  R16.4 billion to repay the guaranteed debt for the struggling airline SAA. 

Should this rescue plan be adopted government will agree to fund this R21 billion plan. 

The airline, which last made a profit in 2011, has been in business rescue since December 2019. Since 2003 it has received over R31 billion in government bailouts and its recently-released financial statements reveal that SAA has made losses of R10.4 billion in the past two years. 

The final rescue plan was meant to be released on Friday, however Matuson and Dongwana requested an extension to June 8 from creditors.