SA Airlink is headed to court to try to prevent R700 million of its cash from disappearing into the financial black hole of SAA’s finances.
Airlink, which employs 1 739 people, could be brought to its knees if it does not get its money back, the airline’s CEO Rodger Foster states in an affidavit before the Johannesburg High Court.
SA Airlink is asking the court to intervene on an urgent basis and grant an order forcing SAA’s business rescue practitioners to pay the money over immediately.
But for SAA, the payment of such a large sum could also be the final nail in the coffin, said Werner Human, the deputy CEO of trade union Solidarity, which is represented on the business rescue labour committee.
It is expected that the case will be heard by the court within the next two weeks.
The dispute relates to revenue from ticket sales concluded by SAA on behalf of SA Airlink – revenue which therefore does not belong to SAA, says Foster.
In a separate case, transport and logistics company Ziegler SA is applying to have SA Express placed in business rescue. An affidavit by the managing director of Ziegler reveals that SAA also owes state-owned SA Express R20 million for ticket sales.
SAA got some reprieve this week after the Development Bank of Southern Africa granted it a loan of R3.5 billion, of which R2 billion would be made available immediately.
Another amount of R2 billion in post-commencement finance, which a group of banks had made available to SAA in December, has ostensibly been used up already.
GOBBLING UP MONEY
Human said the rate at which Eskom was gobbling up money had accelerated dramatically since it was placed in business rescue on December 5. “Previously, the losses were between R5 billion and R6 billion a year. Since December, however, SAA has swallowed the R2 billion from the banks, and now it has an additional R3.5 billion. That is already R5.5 billion in less than two months,” he said.
Funders have lost any appetite to support SAA further, and it is now a day-to-day battle to keep the airline out of liquidation. Having to fork out R700 million could be the final straw, said Human. To make matters worse, ticket sales have apparently dried up. SAA cancelled more than 90 of its February flights on Thursday afternoon.
Business rescue usually protects companies against claims for debt incurred shortly before the company was placed in business rescue, but Airlink argues that this money is not really debt. It was always Airlink’s money for flights it operated independently; the tickets were merely sold by SAA as an agent of Airlink, argues Foster in court papers.
He explains that Airlink and SAA have been working in alliance with each other for decades to offer their travellers a more comprehensive service. This cooperation includes SAA selling tickets on behalf of Airlink on its computer systems, and collecting the money on Airlink’s behalf.
SAA also uses the International Air Transport Association’s payment system in the process.
The airline issues a monthly statement to Airlink and the money is then paid over to Airlink, after SAA’s own commission and certain other costs have been deducted.
In 2000, Airlink paid more than R34 million for a licence for the use of SAA’s intellectual property. Since then, SAA has earned about 1% commission on ticket sales.
In December, SAA issued the November statement, as is the normal practice. That was on December 6, the day after the airline went into business rescue.
But the date on which payment was due – December 10 – came and went, without Airlink seeing a cent of the more than R220 million it was owed. A further invoice SAA generated and issued on December 18, for related income, brought the total outstanding amount for November to R430 million.
For the first five days of December, before business rescue was announced, SAA owed Airlink a further R83 million, said Foster in his affidavit.
The business rescue practitioners agreed to make daily payments to Airlink from December 6, but this was only for “new” Airlink income. According to the practitioners, the amounts due from before business rescue are frozen, just like those owed to all other creditors.
According to Foster, SAA owes Airlink a further R201 million for tickets sold between July 2018 and November 2019, but not utilised. That brings Airlink’s total claim to more than R700 million.
The Companies Act provides for a general moratorium on litigation against companies in business rescue, unless the business rescue practitioners agree to it in writing.
SAA’s practitioners, Les Matuson and Siviwe Dongwana, did not respond to a formal request for written permission, Foster said, adding: “This position can’t be sustained for much longer.”
Airlink’s working capital can be depleted within six to eight weeks, which could jeopardise the airline’s operations.
Foster’s affidavit is dated January 16, which means he has estimated that funds could dry up from the end of February.
Matuson and Dongwana would not comment on the matter.
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