SAA rescue plan faces pushback from competitor and labour

A vote to accept or reject South African Airways’s (SAA) rescue plan is due to take place on Thursday, but not without hurdles. 

Competitor SA Airlink has made an application to interdict the creditors meeting and has also called for the courts to place SAA under provisional liquidation saying the airline’s rescue has no reasonable prospects of success. 

This was revealed by the Department of Public Enterprises (DPE) on Monday which said that while it was not cited in SA Airlink’s papers it would oppose the applications as the shareholder representative. 

No easy victories

SAA’s business rescue practitioners released the airline’s final rescue plan last week. The plan requires the government to commit to raising R10.3 billion in new money towards the establishment of a new airline. This is in addition to the R16.4 billion that the government has already set aside to pay off guaranteed debt and interest in the current airline.

It has taken the BRPs six months to develop this rescue plan after delays in funding, Covid-19 and wrangling with the government and labour contributed to delays which resulted in the BRPs receiving five extensions on its deadline.

Read: Government expected to support restructured SAA until March 2024

The DPE said it was also aware of the National Union of Metalworkers of South Africa (Numsa) and the South African Airways Cabin Crew Association (Sacca) plans to interdict the creditor’s meeting through the courts. It also intends to oppose this. 

“As we approach the final week to either endorse or reject the business rescue plan it is disturbing that a competitor of SAA, which is 100% privately-owned, as well as two labour unions, who should be acting in the best interest of their members, are seeking to destroy SAA by forcing a liquidation through the courts,” said the department. 

“The question is why? Is this really in the interest of SAA workers or the fiscus?”

Fiscal constraints

The creditors meeting is due to take place a day after Finance Minister Tito Mboweni delivers his supplementary budget on June 24.

Government funds are already strained due to the demands brought on by the Covid-19 pandemic that led to the government responding with a R500 billion economic and social support package, of which R130 billion will have to be funded through reallocations from the current fiscal framework. 

“The government is committed to supporting a competitive, viable and sustainable national airline and wishes to engage constructively towards the national interest objective of such an airline in a constrained fiscal environment, taking into account the impact of the Covid-19 pandemic on this situation,” the department stated.