SAA scrambling to get R2bn as deadline looms - source


South African Airways is apparently scrambling to obtain R2bn before November 20, a source told Fin24 on Thursday.

Asked about the alleged rush, SAA spokesperson Tlali Tlali told Fin24 that the R2bn was "always part of our requirements for working capital so this is not new".

He said SAA is in the process of "procuring that required amount"

Over the past 13 years, the flag carrier has incurred over R28bn in cumulative losses. In last week's mid-term budget, Finance Minister Tito Mboweni announced that the state would pay off SAA's government-guaranteed debt of R9.2bn "over the next three years" to honour the airline's contractual obligations.

Asked for his thoughts on the claims of a scramble to obtain the funding in time, Dr Azar Jammine, director and chief economist of Econometrix, said that while he did not have specific knowledge about the R2bn, this is the kind of thing that has been happening at SAA over the past few years. The airline, he said, is given lines of credit which then expire and has to borrow money anew.

"The commercial banks have been getting a bit sticky about lending money to SAA without the necessary (state) guarantees because of the huge losses the airline made," Jammine told Fin24. He explained that the provision of such a guarantee by the government, should a bank require it to give SAA a loan, is different to a "bailout" where government would simply give SAA the money.

Jammine said it could be that a lot of short-term SAA loans might be expiring, leading to an inevitable scramble to deal with it by lending more money.

"In the broader scheme of things, R2bn is not a huge amount of money if you compare it to Eskom's R450bn debt of which the SA government is willing to guarantee R200bn," he said.

"However, it does show that SAA is not generating enough money from its own operations and that is serious and should be addressed. It is running a decent operation, but not making money. So, ultimately it becomes short of cash. It highlights that some kind of restructuring is needed to get SAA to become profitable."

Mboweni echoed this view in his mini budget, describing SAA as "insolvent" and unlikely to "ever generate sufficient cash flow" from operations in its current configuration. The finance minister also said he welcomed "conversations" between the flag carrier and potential equity partners.

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