SAA subsidiaries to receive funding

Subsidiaries of South African Airways (SAA) are to get around R2.7 billion from the R10.5 billion allocated to the airline to implement its business rescue plan.

SAA Technical (SAAT) will receive R1.663 billion, Mango Airlines R819 million, and Air Chefs R218 million.

This follows the tabling of a Special Appropriation Bill by the Minister of Finance on Tuesday.

“Despite the effective date of this Act, the appropriation for the subsidiaries … must be regarded as an appropriation and expenditure for the 2020/21 financial year,” states the bill.

The Chief Director of state-owned enterprises at National Treasury, Ravesh Rajlal, told parliament’s standing committee on appropriations on Tuesday that at the time of the funding allocation for SAA, the Department of Public Enterprises (DPE) informed the treasury that the allocations made to SAA subsidiaries in the business rescue plan may change due to the expected restructuring of the airline when the interim board takes over.

“If more funding beyond the R819 million is required for Mango then that amount will have to be looked into from the existing R2.7 billion,” he said.

Rajlal told the committee that SAA has received close to R50 billion since 2008 from the government in the form of guarantees.

“It’s hard to see the value of the amounts given to SAA. This is why we [National Treasury] have issued the instruction note on government guarantees to make a bit more stricter in terms of how government guarantees are actually applied for and awarded,” he said.

While SAA had been under business rescue since December 2019, its subsidiaries Mango, SAAT and Air Chefs have not. The SAA business rescue practitioners were therefore not legally mandated to spend any of the post-commencement finance to assist the subsidiaries.

SAA exited business rescue at the end of April with the rescue practitioners saying the airline is now “solvent and liquid”.

The lack of funding for the SAA subsidiaries and the adverse impact that the Covid-19 pandemic has had on the aviation industry has left the three companies scrambling for cash.

The cash crunch saw Mango abruptly suspending its flights in April following its failure to settle payments relating to passenger service charges and landing and parking fees with the Airports Company of South Africa (Acsa). The flights however resumed following funding discussions with the DPE, the SAA and Mango boards, and the airport management company.

SAAT and Air Chefs were unable to pay full salaries to their staff during the hard lockdown in 2020. SAAT staff have only received between 25% and 50% of their salaries every month for the last year.

The National Union of Metal Workers of South Africa (Numsa), the South African Cabin Crew Association (Sacca) and Solidarity had previously told Moneyweb that there is still no clarity on the payment of salaries at SAAT for May and June.