Aviation Analyst, Guy Leitch says government’s decision to place South African Airways (SAA) on business rescue is the best way of saving the airline.
President Cyril Ramaphosa on Wednesday night instructed the government to urgently implement the process of putting the struggling airline under business rescue.
SAA has not made a profit since 2011 and is dependent on government bailouts to remain solvent.
It suffered a crippling strike last month and was forced to cancel hundreds of flights and this pushed it to the brink of collapse.
Leitch says radical restructuring should now get under way at SAA.
He says, “It does require further forceful implementation of the already existing turnaround strategy which was pretty good. The airline called it a long-term turnaround strategy that needs to be properly enforced, cut away all the non-profitable risks. I believe the airline can be saved.”
Meanwhile, the Public Enterprises Department has confirmed that national treasury will soon give SAA a guarantee to enable it to approach lenders to get R 2 billion of what it describes as post commencement finance.
This will happen ahead of the placement of SAA on business rescue.
The Acting Deputy Director-General at the Public Enterprises Department, Advocate Melanchton Makobe says, “When a company is placed on business rescue, there’s what is called a post-commencement finance, it is effectively oxygen into the company for it to continue operating. What national treasury will provide is a guarantee of two-billion and SAA will have to go to the lenders and look for that two-billion, this is to enable the business to continue to operate while the restructuring process under the business rescue practitioner proceeds.”