The government has told the SAA business rescue practitioners (BRP) that it is unable to provide the airline with more funding, portending its imminent death or at best an orderly winding down, notes a Business Day report.

It also refused its request to raise funding for the airline in foreign capital markets. SAA is unable to raise further funding in domestic markets and owes significant debt to a consortium of local banks.

SA Express, also state-owned, is in liquidation.

The practitioners, Les Matuson and Siviwe Dongwana, advised creditors of the development yesterday, saying that they were ‘assessing the impact of this development on the business rescue process and will communicate any developments in due course.’ Based on the business rescue options selected by the Department of Public Enterprises, the BRPs had advised the government that a minimum of a further R7.7bn would be required to fund SAA into the next phase.

Matuson and Dongwana had expected that this funding would be made available in the February budget.

Instead a provision was made to repay R9.2bn of historical debt. A further R2bn borrowed from banks and R3.5bn from the Development Bank of Southern Africa had already been extended to fund the rescue process.

On 20 December, Matuson warned that if SAA could not be rescued through restructuring then ‘a structured wind down’ is the next option. He noted that ‘the vast majority of business rescue proceedings in SA have followed the second outcome’.

Full Business Day report

Finance Minister Tito Mboweni says the proposal to ‘close’ SAA and SA Express will be made to Cabinet today as part of Treasury’s Covid-19 response, Beeld reports.

Aviation expert Linden Birns says what isn't known is whether the government wants to close only SAA or its subsidiaries such as Mango and SAA Technical as well.

Although the government could potentially save R16.4bn already earmarked in the budget to bail out the airline, a winding-up is expected to be costly as well.

SAA director Martin Kingston last year told Parliament it would cost some R60bn to liquidate SAA.

Full Beeld report (subscription needed)

At some point government was bound to realise that supporting an unsustainable airline was taking money away from other priorities, economist and director of Econometrix, Azar Jammine, is quoted as saying by Fin24.

Faced with the pressures of the coronavirus pandemic and needing to redirect fiscal resources to ramping up testing, it was a good call to make, he said.

‘SAA is hardly functioning at the moment other than flying on rescue missions. They have no revenue coming in. So, the only way they can survive is by pouring more billions of rands into them which is like pouring money into a hole,’ said Jammine.

SAA went into business rescue shortly after a crippling strike in November 2019.

Full Fin24 report