South African Airways (SAA) has received a boost in its efforts to return to profitability, following an announcement by the South African government that it will allocate R 1 billion ($54.4 million) towards settling some of the outstanding obligations related to SAA’s 2020 Business Rescue Plan.
The allocation is part of the government’s commitment to the business rescue process that SAA exited in April 2021, and will be used to cover outstanding liabilities, specifically those relating to the final dividend payment to creditors and the refund of legacy un-flown tickets to affected passengers. These obligations date back to the period when SAA was placed in business rescue in December 2019.
SAA’s Executive Chairman and Chief Executive Officer, Professor John Lamola, welcomed the announcement, noting that SAA’s operations have progressed positively since the airline emerged from business rescue. As reported to Parliament earlier in the month, SAA is no longer technically insolvent, a milestone which the company achieved a year earlier than projected.
Chief Financial Officer Fikile Mhlontlo emphasized that the allocation announced relates only to historical debt, and is not meant to bolster the current business plan being executed by SAA. He noted that SAA has reached a point where it covers its operating costs, and that the funds will be used solely to settle outstanding liabilities.
The R1 billion allocation is part of an original R 3.5 billion that was needed for SAA to settle all debt that the Business Rescue practitioners had ring-fenced into a Receivership. Due to the financial performance of SAA and the innovations of its management team, the total balance expected from National Treasury has been reduced to R2.586 billion. The airline will continue to negotiate with National Treasury for the balance of the funds and cooperate with all conditions that may accompany the flow of these funds.
The announcement of the allocation is a positive development for SAA, which has faced significant financial challenges in recent years. The airline has undergone a difficult restructuring process, which saw it enter business rescue in December 2019. Since exiting business rescue in April 2021, SAA has been focused on rebuilding its operations and regaining the trust of customers and stakeholders.
The allocation from the government will go a long way towards helping SAA settle its outstanding liabilities and strengthening its financial position.
