South African Airways goes under bankruptcy protection


South African Airways has entered a bankruptcy protection program that the state-owned African carrier—the largest on the continent—hopes will help avert total collapse.

These are not the best of times for the airline industry. Traffic data released yesterday by the International Air Transportation Association (IATA) show a moderate slowdown in passenger demand growth, though the overall picture is far from bleak. South African Airways (SAA) has its own share of challenges at other levels. The airline has been in the red in nearly a decade, and has survived on more than 20 billion rand ($1.3 billion) bailouts in the past three years alone. The bad picture was not helped by the eight-day strike the airline endured just last month, which led to the cancellation of hundreds of flights.

Under what he terms a “radical restructuring,” South Africa’s Public Enterprises Minister, Pravin Gordhan, said yesterday in a statement that the airline will receive 4 billion rand ($274 million) in funding. The official also said: “This is the optimal mechanism to restore confidence in SAA and to safeguard the good assets of SAA and help to restructure and reposition the entity into one that is stronger, more sustainable and able to grow and attract an equity partner.”

The rescue thus being granted to the airline falls under the South Africa’s Company Act designed to save distressed companies from collapse. In sum, SAA, which has not turned a profit since 2011, has received repeated shots in the arm totaling 57 billion rand ($3.8 billion) since 1994.

The rescue plan to save SAA includes lender providing a 2 billion rand ($136.5 million) in government-guaranteed financing, and 2 billion rand from the South African government.

Tod Neuman, Executive Vice President for North America, says in an email that the airline “intends to operate a normal flight schedule under business rescue, and any changes will be communicated … as soon as possible.” He stresses that low-cost carrier Mango Airlines, South African Express and Airlink will also continue to operate normally.

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