Airlink seeks to block SAA rescue plan with urgent court action

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(Supplied)
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The South Gauteng High Court in Johannesburg will on Wednesday 24 June hear an urgent application by privately-owned regional airline Airlink wanting to interdict a creditors meeting to vote on the business rescue plan proposed for South African Airways.

The creditors meeting was set by the state-owned flag carrier's business rescue practitioners for Thursday 25 June at 11:00.

Both the Department of Public Enterprises as shareholder of SAA, as well as the rescue practitioners intend to oppose the court application.

Airlink argues that the rescue plan prejudices concurrent creditors, including Airlink, to the benefit of the Department of Public Enterprises, "which will then own an unencumbered business, funded by concurrent creditors, but still commercially insolvent".

Concurrent creditors, in legal terms, stand at the very end of the queue when it come to the possibility of receiving anything from an insolvent estate.

Currently, in terms of the proposed rescue plan, concurrent creditors like Airlink will only get 7.5 cents in the rand.

Airlink said in a statement that it will also seek to have the rescue process terminated, the appointment of the practitioners set aside, and apply for SAA be placed in provisional liquidation. If SAA is placed in liquidation it will lose its operating licences.

In the view of Airlink, the rescue plan is not commercially viable, especially given the uncertain outlook for the airline industry after the Covid-19 crisis.

"The plan requires taxpayers to prop up the company for several years post rescue. The plan is still conditional, SAA remains commercially insolvent on the business rescue practitioners’ own version, and there is no indication as to how the plan and the expected losses will be funded," states Airlink.  

In its statement, Airlink says, unlike what the Department of Public Enterprises alleges, it is not a competitor for SAA, but has for the past 23 years been feeding traffic onto the mainline services of the national carrier in terms of a franchise agreement.

Earlier this year Airlink terminated the franchise agreement after SAA went into business rescue and failed to pay over more than R700 million of revenue for tickets issued on flights flown by Airlink.  

In the view of Airlink, the rescue practitioners are not adequately independent. The Companies Act requires business rescue practitioners to act in the interest of all affected parties.

The National Transport Movement (NTM) expressed concern that the Airlink court application might "tilt" the rescue attempt of SAA towards liquidation and is glad that government intends to oppose it.

"This lengthy rescue process which has caused a lot of tax payers monies and pain to workers for it to be derailed," says NTM president Mashudu Raphetha. He cautioned against SA's state-owned enterprises, like SAA, being destroyed.

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