SAA’s R10.5bn bailout doesn’t cover aircraft lessors, other creditors

Debts to aircraft lessors and some creditors of South African Airways (SAA) are not covered by a R10.5 billion government bailout, administrators said, raising the prospect that future state budgets will have to keep paying out for SAA.

South Africa’s government allocated the latest cash injection to state-owned SAA in last month’s mid-term budget for a restructuring plan that has been awaiting funding since July.

It has poured tens of billions of rand into SAA over more than a decade — controversial spending in a country with high poverty rates and an urgent need improve basic services.

Administrators told Reuters late on Thursday that the R10.5 billion was for “initial commitments”, while R1.7 billion owed to lessors and R600 million to creditors from before the airline went into administration nearly a year ago would be paid over three years from next year.

Kgathatso Tlhakudi, director-general of the ministry responsible for SAA, said the idea was that the government would pay the amounts to lessors and longstanding creditors but that it was still working on a solution.

The government is wooing investors for a partnership deal to reduce SAA’s dependence on stretched public finances. “The ultimate aim is to remove the burden … from our shoulders,” Public Enterprises Minister Pravin Gordhan told lawmakers this week.

Talks could be complicated if it does not pay the outstanding debts.

SAA has not made a profit since 2011 and is expected to lose at least R6 billion over the next three years.

Its administrators said on Wednesday that the plan was for R2.8 billion of the latest bailout money to go on employee-related payments, R2.7 billion on recapitalising subsidiaries including Mango Airlines and R2 billion on working capital.

Another R2.2 billion would repay those who had bought tickets but could not fly and R0.8 billion was for creditors who had funded SAA since it went into administration.

SAA’s operations were mothballed in late September when funds ran low.