5 November 2018

South African Airways Gets U.S.$343 Million Govt Bailout

South African Airways (SAA) has received $343 million from the government to pay off some of its debts and for capitalisation.

In his mid-term budget allocation, Finance Minister Tito Mboweni announced the bailout through a Special Appropriation Bill. The funds are to settle a $970 million debt due by March next year.

"We will do this so as to protect the airline from its creditors calling in on its outstanding $1.11 billion, which is guaranteed by government," Mr Mboweni said.

The South African national carrier has over $1.3 billion in government guaranteed debt, of which at least $1 billion has been drawn down.

The allocation includes $80 million to South African Express, a subsidiary of the national airline, to cover debt obligations.

"So far we have saved $27.5 million from the procurement department alone. We are working hand in hand with the board to ensure their costs are down and their operational plans remain solid," Mr Mboweni said.

The South African government is also pushing for talks between the carrier and its creditors to either refinance it or extend the loan maturity dates to give SAA space to achieve its turnaround plan.

"As it is, it would be very difficult to even find an equity partner because the airline is not generating sufficient revenues to pay off its debt. Finding an equity partner to assume a debt of more than $1.3 billion would be a tall order," Mr Mboweni said.

In July, SAA was said to have been in discussions with Emirates and Etihad. Emirates confirmed that the discussions were about enhancing their code-sharing agreement, but there were no plans to invest.

SAA said it has had discussions with Emirates, Turkish Airways, Qatar Airways, Kenya Airways, Air Mauritius, United Airlines and Singapore Airlines to get commercially viable partnerships that will help it grow its numbers.

"Talks between Emirates and SAA, which have been going on for some months, are being facilitated by the UAE's embassy in Pretoria. Etihad Airways has also been holding separate negotiations with SAA," Mahash Alhameli, UAE's ambassador to South Africa, told South African newspaper City Press.

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