South Africa mulls $1.2bn bailout package for embattled national airline

The relief package will provide the airline funds to repay its debt and resume operations

South Africa' s department of public enterprises withdrew from airline overhaul talks after disagreement with unions over job cuts. Reuters

The administrators running South Africa’s embattled national airline have proposed to the government to provide a 21 billion rand ($1.2bn/Dh4.4bn) bailout to help repay debt and resume operations after the lifting of Covid-19 travel bans.

The plan includes about 17bn rand that will go toward repaying South African Airways creditors, according to a draft copy seen by Bloomberg. As much as 2bn rand will be used for retrenchments and a further 2bn rand will be provided for working capital.

The draft plan “is for discussion purposes only and we await comment from the affected persons,” a spokeswoman for the administrators said, adding that the team has until June 8 to finalise a rescue proposal.

South Africa’s public enterprises ministry, which is responsible for SAA, has not yet discussed the draft plan, spokesman Sam Mkokeli said. The National Treasury said earlier this year it would allocate funds to repay creditors as the airline’s debt is government guaranteed.

While the funding agreement has yet to be finalised, a deal of this nature would bring to an end an impasse between the government and SAA’s business-rescue team over the airline’s future. The administrators, appointed in December, had an earlier request for state funding rejected in April, and subsequently proposed firing the entire workforce to stave off liquidation.

Public enterprises minister, Pravin Gordhan, strongly objected to that plan, and announced his ambitions for the creation of a new airline, starting off a fresh round of talks.

SAA’s commercial passenger planes have been grounded since late March, when the government closed borders for non-urgent travel to contain the coronavirus. Some domestic flights are being allowed to operate as of Monday for business purposes, though SAA had previously reduced its local services to a single Johannesburg-Cape Town route.