THE SA government says it has received unsolicited proposals from private-sector funders, private equity investors and potential airline partners for a new national airline to emerge from the SAA business rescue process.
A statement by the Department of Public Enterprises (DPE) says government intends to pursue “credible proposals for investment and strategic partnerships with the private sector, as well as equity participation for employees”. It says such partners will also introduce technical, financial, and operational expertise.
The statement is timed ahead of South Africa’s revised emergency budget to be tabled by Finance Minister Tito Mboweni today, when he is expected to outline the country’s spending priorities and indicate whether government can afford to fund a new SAA.
It also comes ahead of a court interdict to be heard in the South Gauteng High Court today (June 24), in which Airlink seeks to prevent a SAA creditors meeting scheduled for Thursday, June 25 (for more on this story click here).
The DPE says airlines worldwide are under financial pressure due to COVID-19 but believes “there are possibilities for airline partnerships to improve scale and scope”.
It reiterates government’s commitment to support the formation of a new airline “with no legacy financial and operational issues, managed by competent, competitive and skilled personnel who have strategic and technical capabilities”.
It says government envisages “an efficient and modern aircraft fleet with hybrid density options acquired at competitive rates resulting in cost efficiency; the right routes, at the right times, at competitive prices; a motivated, productive and efficient workforce determined to increase market share; a customer-centric airline designed to be lean, technology savvy, digitally native and agile to service all market segments; and the appointment of an effective, competent and empowered board of directors with appropriate aviation experience”.
The statement, however, does not address historic oversight issues by the DPE, highlighted in the business rescue plan, and how these will be addressed. This includes SAA having suffered significant losses every year since 2014, accumulating to more than R27bn in 2019; a lack of recapitalisation that resulted in severe liquidity constraints; governance issues that resulted in a high turnover of executive management, including eight ceos over the past 10 years; and inadequate capitalisation of SAA’s subsidiaries, with increasing dependency on SAA to provide them with working capital.
