SAA gets bailed out

2012-10-03 09:00
The South African government has announced it will help national carrier South African Airways with R5-billion of financing over two years, in a bid to get the troubled firm back off the ground.

"Government is committed to working with SAA's management and board of directors to ensure that SAA is a viable and a financially sustainable airline," the National Treasury and Ministry of Public Enterprises said in a statement.

The bailout will take the form of loan guarantees, providing would-be investors with the promise that the government will stump up for any unpaid loans.

"The guarantee will enable SAA to borrow from the financial markets, thus ensuring that the airline continues to operate as a going concern," government officials said.

The airline will now have to present a turnaround strategy to business and prove it remains a going concern.

Long financially troubled, SAA's profits have been hit by the rising cost of fuel and reduced passenger numbers as the result of the global financial downturn.

In 2011, the carrier reported an increase in profit from R442-million in 2010 to R782-million, boosted by the 2010 FIFA World Cup. But for the most part the airline has struggled to make a profit.

And previous attempts at restructuring have fallen flat.

The announcement comes just days after the embattled state-backed carrier was plunged into crisis when its chairwoman and seven board members resigned in protest.

Cheryl Carolus announced her resignation through local media, saying that relations with the government - the airline's sole shareholder - had become untenable.

Carolus had objected to a delay in publishing the airline's accounts for the last year. Speculation is rife that the firm will report a massive loss this year.

But Carolus's replacement Vuyisile Kona on Tuesday insisted that SAA's troubles were part of an industry-wide crisis.

"It is not just only SAA that is experiencing problems," he told a state news service.

"The South African government is not the only government that is supporting its airline. The Japanese government poured billions into its bankrupt airline. We don't want to go that route. We rather want to fine tune operations without allowing the airline to go into bankruptcy," he said.

Earlier this year the airline asked for a cash injection of up to R6-billion.

While the bailout falls R1-billion short of that figure, it is only likely to fuel calls for the airline to be privatised. The company's annual general meeting will take place on 15 October.

-AFP

 
Read more on:    saa  |  travel south africa  |  flights
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