GOVERNMENT has effectively rejected South African Airway’s (SAA) proposed R10 billion business rescue plan, suggesting that it is inadequate given the time and money that Business Rescue Practitioners had put together.
The 110-page document was published by Business Rescue Practitioners (BSPs) Siviwe Dongwana and Les Matuson on Monday.
The plan proposes a restructured airline to resume domestic service “in the near future” and a full domestic service to resume in 2021.
Thereafter, the airline will resume regional and international flights guided by passenger demand and easing of travel restrictions due to the COVID-19 pandemic.
The plan requires government to stump up the cash where a strategic equity partner cannot be found before July 15, an unlikely prospect given current market conditions due to COVID-19.
The R10 billion is slightly up from a figure of R7,1 billion given to the portfolio committee on public enterprise, the Select Committee on Public Enterprises and Communications and the Standing Committee on Public Accounts (Scopa).
The department has described the figure as a moving target which it cannot back financially.
In its preliminary response to the plan issued in a statement on Monday evening, the Department of Public Enterprises says “Government, as the sole shareholder of SAA, supports the business rescue plan where it results in a viable, sustainable, competitive airline that provides integrated domestic, regional and international flight services.”
DPE does not say whether the proposed plan achieves this.
The department reiterates the point frequently made by Public enterprises minister Pravin Gordhan about the purpose of the Business Recue Plan, which is to restructure the affairs of a business, including its liabilities, such that it continues operations.
If that fails, the business rescue process must wind down the business by selling off its assets in a way that realizes a better return for creditors and employees that immediate liquidation.
“The BRPs had a substantial period of time and additional financial resources – R5.5 billion to augment the revenue of SAA – at their disposal to undertake the tasks expected of a BRP, which, in terms of the Companies Act, to develop a detailed business rescue plan, to consult with creditors, other affected stakeholders like employees, the Shareholder and the Board and management of the company under business rescue.”
The department said: “In addition to this amount, further revenue was generated over the last six months, through repatriation flights and cargo flights for essential goods.”
Government then reiterates its expectations that “a viable, sustainable national carrier must emerge from the business rescue process” government also points out that though government guarantees, the rescuers had access to more financial resources before noting: “We will assess the plan which, we are concerned, might have not been adequately accomplished.”
The Business Rescue Plan includes restructuring cost, payment of creditors and severance for employees and commencement finance for the new airline.
The plan includes R600 million payment current creditors and R 1.7 billion to lessors of aircraft, to whom SAA recently returned planes it no longer deemed part of its fleet requirement.
The BRPs lists advantages of the proposed restructuring as being that SAA continues as a solvent entity, fewer workers would be retrenched than would be the case under liquidation and those that are retrenched will get better severance while creditors will get R600 million instead of nothing under the liquidation.
It is unclear what parts of the new plan government has misgivings about.
(Compiled by Inside Politics staff)