South African Airways administrators said they will decide within the next week whether to sell or liquidate the insolvent carrier if 10.5 billion rand ($620 million) pledged by the government fails to be delivered.
The business-rescue practitioners have placed SAA under care and maintenance in the meantime, suspending all operations, while they wait for the state to come up with the required package, according to a letter to creditors sent on Tuesday.
“Certain funders have indicated a willingness to provide a portion of the funding” subject to certain conditions, the administrators said, without giving further detail. How to proceed if a cash injection doesn’t come to fruition may include a sale of the carrier or its assets, with liquidation another option, they said.
The fate of SAA has become an emotive topic in South Africa as the country struggles to recover from Covid-19 and an economy that was in recession even before the virus hit. Public Enterprises Minister Pravin Gordhan has made the resuscitation of the airline a major priority, but Finance Minister Tito Mboweni has made clear he does not support further bailouts with limited state funds needed elsewhere.
The National Treasury said in July it would help “mobilize” funding, and Gordhan’s Department of Public Enterprises has repeatedly claimed to have received numerous approaches from interested private backers. Yet no formal offer has been placed more than two months later, and it’s not clear whether backing will be secured, despite some interest from Ethiopian Airlines Group.
The Treasury wants strict conditions attached to any guarantees it provides for loans to SAA, two people familiar with the matter said this week. President Cyril Ramaphosa has backed the airline’s rescue, they said.
SAA will fly the cargo and repatriation flights it has already committed to but won’t accept any more for now, a spokeswoman for the administrators said.
South Africa is due to open its international border for commercial flights from 1 October, more than six months after closing them to contain the coronavirus.
By Bonga Dlulane for EWN
The South African Airways (SAA) business rescue plan (BRP) has been approved by 86% of the vote at Tuesday’s creditors’ meeting.
This paves the way for the Department of Public Enterprises (DPE) to launch a new airline with an interim board and CEO.
The department will announce a new board soon and the interim CEO of the airline is Phillip Saunders.
The approval of the plan comes after months of public spats between the department, unions and business rescue practitioners.
It’s a major win for the department as it has fought for SAA to be restructured and not liquidated.
The new airline will need approximately R16 billion to get off the ground and pay creditors.
Money will also be needed for the 1,000 staff who will be hired to be part of the airline.
With the approval of the plan, voluntary severance packages will be paid to over 2,700 employees who will now be retrenched.
By Babalo Ndenze for EWN
Some members of Parliament said that the only option left for South African Airways (SAA) was liquidation.
This comes after a vote on a restructuring plan was delayed until July after creditors and unions adjourned talks.
It also follows a decision by the Department of Public Enterprises to withdraw from the Leadership Consultative Forum working on a business model for a new and restructured SAA.
The Department of Public Enterprises said that instead of creating conditions for attracting investment and skilled South Africans, three unions had put SAA on a path towards possible liquidation.
The department said that unions had effectively aligned themselves with a competitor who stood to benefit substantially should SAA be liquidated.
However the Democratic Alliance (DA)’s Alf Lees, a member of the Standing Committee on Public Accounts (Scopa), said that liquidation was increasingly looking like the only option.
“Now it seems to me that we’ve hit the wall and liquidation is the only option,” Lees said.
He said that the business rescue process should ideally have ended in December and the rescue team should have applied to court for liquidation back then.
“They should have then done what the law required of them to do and applied to court for liquidation, so that step now remains.”
By Sumit Rehal for Simple Flying
FlySafair has expressed an interest in purchasing fellow South African carrier Mango Airlines, if it is put up for sale. The airline’s Chief Executive Officer Elmar Conradie confirmed the potential move on Tuesday.
IOL reports that FlySafair’s management approached South African Airways’ administrators about a possible acquisition of the low-cost carrier. However, Conradie made it clear that he is only interested in Mango and not any other aspects of its struggling parent company.
Mango was founded in 2006 and operates mostly domestic routes within South Africa. However, it does serve Zanzibar, the is a semi-autonomous region of Tanzania.
Conradie affirmed that a purchase of SAA Technical, which specializes in aircraft maintenance would not make sense. This is because his carrier is already serviced by Safair Operations (Pty) Ltd, its own parent company.
South African Airways has been going through a dire period as of late with struggling financials. Last month, South Africa’s National Treasury shared that it will provide a $1 billion bailout for the country’s flag carrier. However, this decision has been met with criticism by many members of the nation’s public due to the amount of funds being spent on the airline.
Meanwhile, FlySafair has been seeing great progress since it commenced operations six years ago. It currently flies to seven destinations across South Africa and it continues to increase its routes and frequencies.
Moreover, it is set to announce a new service to Durban from Johannesburg next week. Meanwhile, it has been slowly upgrading its fleet of 17 aging Boeing 737-400 aircraft to updated 737-800 models.
While the novel coronavirus outbreak is having a massive shift in the global aviation industry, Conradie claims that it has not had an impact on his firm’s operations as of yet. In fact, FlySafair is expecting capacity to increase by 15 percent this year and is yet to see any negative results on bookings amid the spread of the virus.
Several other airlines have been forced to cut many of their flights by the day due to the drop in demand. Additionally, some carriers have had to suspend services due to governmental policy, such as Kuwait’s recent decision to close its intentional airport.
South Africa currently has 16 active cases. However, with the World Health Organization now classing the outbreak as a pandemic, airlines across South Africa could start to feel the brunt of it. Ultimately, South African Airways will be keeping a close eye due to its existing struggles.
South African Airways (SAA) has issued notice to all 4 700 of its employees that it intends to begin consultations on retrenchments, the business rescue practitioners (BRPs) for the troubled national carrier said on Monday.
“The joint BRPs today announced that South African Airways SOC Limited has issued a notice advising its employees of the intention to begin imminent consultations in terms of section 189 of the Labour Relations Act 66 of 1995,” a spokeswoman for the BRPs said.
They stressed that retrenchments, along with route and fleet reductions, were essential to avoid liquidation and said therefore a shorter consultation process had been proposed.
The notices went out to all unions representing staff and management, following talks over the weekend and earlier with labour representatives.
A reduction in route flow as well as the airline’s fleet were unavoidable, and apart from cutting staff, salaries could also be reduced, said the BRPs.
“The BRPs contemplate that all 4 708 employees will be affected and the number of jobs that will exist in the restructured organisation will be the subject of the consultation process.
“Significant changes to conditions of employment, including remuneration and benefits, appear unavoidable and will be sought by agreement.”
They added that they would seek to preserve as many jobs as possible but cautioned that the outlook for SAA had dimmed further following the spread of the Covid-19 virus and its impact on international travel.
SAA has stacked up losses of R26 billion over the past six years and was placed in voluntary business rescue in December.
“Load factors on the airline have declined steadily from August 2019 to a low of 71 percent in January 2020. Forward sales have also declined significantly with all markets showing negative or minimal growth, within a very competitive market. The recent marked decline in travel due to the Covid-19 virus will further exacerbate matters.
“The changes required at SAA are therefore both structural and economic. They are urgent if liquidation is to ultimately be avoided in which event all employees will lose their jobs.”
The business rescue team, which is due to submit a report to government at the end of March, said they were proposing a fundamental restructuring to enable SAA to function as a sustainable African airline and the current structure did not allow for this.
The restructuring process at this stage does not affect staff at SAA’s subsidiaries Mango, SAA Technical and Airchefs.
Initial consultations with staff and representatives will be held on Thursday.
The legally prescribed 60-day consultation process would end on May 8. However, the business rescue practitioners said an expedited month-long consultation process ending April 8 had been proposed in an effort to avoid liquidation.
It is essential that this process achieve an agreement between the company and the unions that will be communicated to the creditors and the lenders as part of the business rescue plan, if the business rescue plan is to be approved and liquidation avoided.
“The business rescue practitioners believe that if this is achieved, SAA will be sustainable and the future of SAA can be ensured, without further fiscal assistance.”
By Lameez Omarjee for Fin24
The Development Bank of Southern Africa has committed R3.5bn to SAA, business rescue practitioners have confirmed.
In a statement issued on Tuesday afternoon, business rescue practitioners Les Matuson and Siviwe Dongwana said stakeholders can continue flying SAA now that required funding has been secured.
“Stakeholders of the airline should now have comfort that the rescue process is on a significantly sounder footing, and that passengers and travel agencies and airline partners may continue to book air travel on SAA with confidence,” they said.
Earlier on Tuesday Bloomberg reported that government may have received funding from DBSA, which would be government guaranteed. Treasury, the DBSA and SAA would not comment at the time.
When SAA was placed into business rescue, by order of President Cyril Ramaphosa, in December 2019 – both government and creditors committed to jointly provide R4bn.
Local commercial banks had provided R2bn in post-commencement financing – in addition to existing exposures to SAA. However, by mid-January government still had not been able to keep its end of the bargain.
In recent weeks government has managed to obtain the balance required to meet short term liquidity requirements of the airline until the business rescue plan is published. Fin24 understands that the plan will be finalised in February.
“Discussions held with financial institutions have been fruitful with the Development Bank of Southern Africa offering to provide the next tranche of PCF, for a total amount of R3.5bn, with an immediate draw-down of R2bn.
“Furthermore, funding for the restructuring phase after the plan is adopted is being considered by potential funders,” said the business rescue practitioners.
The airline has been facing a liquidity crisis and earlier this month, had to cancel flights in order to save cash.
Following speculation that the airline was going to fold, the Department of Public Enterprises issued a statement on Sunday January 19, 2020 assuring the public of its commitment to saving the airline.
“We are determined to contribute to the Business Rescue process so that we could minimise job losses and give birth to a rejuvenated SAA that all South Africans could be proud of. Collective effort is needed to make SAA as a premier African airline and Star Alliance member,” the Department of Public Enterprises (DPE) said at the time.
By Selene Brophy for Traveller24
South African Airways (SAA) has consolidated its domestic and international flights schedule due to low demand, as the process of business rescue looks to conserve funds.
So while these flight routes have not been cancelled outright, flights with too few bums on seats are being re-accommodated.
SAA has confirmed the following domestic and international flights have been cancelled between the airline’s main hub Oliver Tambo International Airport Johannesburg (JNB) and Cape Town (CPT), as well as between Johannesburg (JNB) and Durban’s King Shaka (DUR) airports.
Mango has confirmed it is re-accommodating affected passengers on certain routes operated by both airlines to minimise disruption.
Domestic flights cancelled include routes between Johannesburg and Cape Town and Johannesburg and Durban. Certain flights on the Johannesburg – Munich, Germany route have also been cancelled.
SAA says it will be reviewing further possible flight schedule amendments over the coming days.
Affected passengers seeking a refund are being advised to contact the airline or their travel agent to make alternative arrangements.
News24 Journalist Jenna Vester, who was at Cape Town International on Tuesday morning, reports that “no obvious disruptions for SAA were immediately apparent”.
The onus is on SAA to accommodate passengers affected by these recently announced flight cancellations due to low demand. However, if passengers elect to cancel any future, operating SAA flights it should be noted that they won’t automatically receive a refund, according to industry expert Natalia Rosa.
Added to this specific cancellation fees will apply. The usual credit card insurance and reversal of purchase, for services or goods not delivered should however apply in the instance of flight cancellation.
SAA has advised it will not be able to assist with disruptions at the airport due to the strike.
Domestic operators to contact to make urgent alternative flight arrangements include: Mango, Airlink, British Airways and Kulula.
SAA has had a torrid 2020 so far, with the company being forced to sell some of its airplanes – and now even some profitable routes – to become more liquid.
South African Airways (SAA) says its future hangs in the balance after its workers went on strike to demand higher wages and protest planned job cuts which forced the state-owned carrier to cancel all its flights.
More than 100 international and local flights international flights were cancelled when the unions began their strike on Friday, which saw SAA shedding at least R200-million – plunging its balance sheet into a deeper crisis.
The National Union of Metalworkers of South Africa and the South African Cabin Crew Association embarked on a strike after SAA announced a restructuring process which may affect 944 jobs.
The striking unions are demanding an 8% across-the-board wage increase. Unions also want to have job security for at least three years and the in-sourcing of services like security, cleaning and ground handling.
According to Numsa and SACCA, SAA pilots recently received a 5.9% increase. The two unions said their members were simply demanding increases as well, which should be higher than pilots as they earn less.
SAA has pointed out that the 5.9% salary stems from a 5-year salary agreement after an arbitration process to which the airline is legally bound.
In a meeting with the striking unions, Minister of Public Enterprise Pravin Gordhan has said that no further financial resources can be advanced to cash-strapped flag carrier SAA. In September, the government issued a R5.5bn bailout to cover SAA’s operational costs, but will be unable to help any more.
South African Airways (SAA) has informed its more than 5,000 employees that it’s restructuring. It is estimated that about 944 staff will be affected – nearly 20% of the workforce.
The national carrier has had its fair share of financial turbulence.
But in the mid-term budget, Finance Minister Tito Mboweni announced that the state would pay off the airline’s R9.2-billion debt over the next three years.
The airline has incurred over R28-billion in cumulative losses over the past 13 years.
By Clinton Moodley for IOL
Some South African Airways (SAA) and Comair flights have been grounded due to irregular findings uncovered during a recent audit of South African Airways Technical (SAAT), both airlines revealed on Tuesday morning.
SAA revealed it “may operate an amended flight schedule” following a decision to recall some of its aircraft to undertake compliance verification in line with the South African Civil Aviation Authority (SACAA) requirements.
The decision to recall the aircraft follows an oversight inspection conducted by SACAA at SAA’s maintenance subsidiary, SAAT.
“Some of the flights will operate later than usual, and SAA has implemented its contingency plans to ensure business continuity,” the airline company revealed.
The airline revealed that there were four domestic flight cancellations.
“While there were only four domestic flight cancellations, SAA took steps to combine flights and deploy bigger aircraft to accommodate affected passengers. This has significantly reduced the impact of the inconvenience on the customers,” the statement added.
SAA maintains that the inspection conducted by SACAA “was in accordance with its regulations and a necessary exercise to ensure compliance and safety.”
Comair warned of possible travel disruptions as some of the company’s aircrafts are also affected by the audit.
A statement revealed that the “affected aircraft may not be flown until the necessary corrective action has been carried out.”
The statement added: “Comair aims to minimise any disruption to its operations. We will keep our customers updated. We do apologise to our customers for any inconvenience to their travel plans and appreciate their support. We are working closely with SAAT to rectify the findings and getting our flights back on schedule as soon as possible.”
Comair revealed that they maintain an IATA Operational Safety Audit (IOSA) accreditation and the company is also audited by British Airways International, the Boeing Company as well as the South African Civil Aviation Authority (SACAA).
Customers can check their latest flight status on the ba.com and kulula.com websites.