SAA’s funding plans are stuck at talking stage

South African Airways is in talks with its existing banks, new lenders and the government. But talking won’t pay off R12.7 billion ($842 million) of imminently maturing debt.

The stricken state-owned carrier called a media briefing on Friday to “give assurances to stakeholders about the airline currently and into the future” following the surprise departure of Chief Executive Officer Vuyani Jarana last week. In his four-page resignation letter, Jarana raised grave concerns about SAA’s finances, most notably that a R3.5 billion bridge facility will run out this month.

Read: Goodbye, SAA

Following a perfunctory opening in which SAA veteran Zuks Ramasia was named the ninth person to be appointed permanent or acting CEO since 2010, non-executive director and Rothschild & Co. banker Martin Kingston laid out the extent of the company’s financial needs. As well as the repayment of the R3.5 billion loan, R9.2 billion is set to mature later this year. Oh, and SAA also needs R4 billion to keep running into 2020.

Read: SAA appoints interim CEO, approaches additional lenders

The carrier is in discussions with both local and international lenders, but if everything Jarana said is accurate, then the government needs to give an explicit show of support before any further debt will be extended. And there’s little sign of that, with finance minister Tito Mboweni saying as recently as April that the airline should be closed down. He also left SAA out of his budget speech in February in favour of a massive bailout for power utility Eskom. 

Read: Sure to rattle Eskom bondholders: It may be ‘too big to support

SAA remains confident that it can break even in the 2020-21 financial year, Kingston said, which would be about a decade after the airline last made a profit. But it needs the shareholder — namely, the government — to address the debt problem, he added.

For that to happen, the airline needs more than talk.