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SAA is solvent. Now it needs a plan to fly

SAA administrators say that the national carrier is close to being both solvent and liquid. But there's still no indication of an imminent return to flying. (Photo by: Education Images/Universal Images Group via Getty Images)


SAA administrators say that the national carrier is close to being both solvent and liquid. But there’s still no indication of an imminent return to flying. (Photo by: Education Images/Universal Images Group via Getty Images)

  • SAA administrators say that the national carrier is close
    to being both solvent and liquid.
  • They expect remaining issues including outstanding
    employee payments to be resolved this month.
  • But there’s still no indication of an imminent return to
    flying.

South African Airways (SAA) administrators are preparing to
wrap up work on the dormant state airline after more than 15 months, yet
questions over its future viability remain as the Covid-19 crisis depresses
demand.

SAA is close to being “both solvent and liquid,”
with remaining issues including outstanding employee payments and the
appointment of a receiver to take over financial management likely to be
resolved this month, a team of business-rescue experts led by Siviwe Dongwana
said in an update.

While the carrier has cut almost 80% of its workforce and
reduced liabilities to R2.6 billion from R38 billion after deals with creditors
and lessors, there’s no indication of an imminent return to flying.

Global air traffic is expected to remain depressed for
years, and even relatively strong airlines remain dependent on governments and
shareholders for help.

SAA has been struggling for years, with the latest
administration process initiated in 2019, months before the pandemic struck, in
a bid to end the steady stream of state bailouts that had kept it afloat.

Flights ceased in March amid global lockdowns, and though
administrators said management is working on the restart plan, no date for a
return has been set.

Future Funding

With the pandemic continuing to depress demand, future
funding for the airline will be the thorniest issue. Finance Minister Tito
Mboweni agreed to free up R10.5 billion in October but remains a strong
opponent of SAA being a burden on stretched national finances.

“The challenge will be in funding the airline over the
next four to five years, as it will still be making losses during this time,”
said independent aviation analyst Linden Burns. “It is still going to need
state support.”

The government wants to find a private-sector partner for
SAA, but with almost every carrier around the world in crisis, options are
likely to be severely limited. Public Enterprises Minister Pravin Gordhan said
last month that three potential candidates had been identified. Ethiopian Airlines
Group has expressed interest in the past, though as an operational rather
financial ally,

The administration process has taken place against a
backdrop of legal actions. Some, including claims from domestic rivals Comair
Ltd. and Airlink, have been resolved. A dispute with pilots is ongoing, as is
SAA’s own litigation against Namibian staff it says stole close to US$1 million
(almost R15 million) in a baggage-claim fraud.

 


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