[ad_1]
The government has rejected South African Airways’ request for funding, putting a key on-site for the airline’s commercial rescue plan.
In a letter to the airline’s business rescue professionals, the Department of Public Enterprises (DPE) said the government cannot support SAA’s request for more R10 billion funds or provide any future funding to support the process. business rescue. The government will also not provide more guarantees to SAA to facilitate the loans, he said.
The airline requested an additional R10 billion on April 2. The letter, dated April 10, shows that the airline wanted to increase its debt limit in foreign currency.
“The government will not support the extension of the foreign currency debt limit to allow foreign financing of the trade rescue plan, nor for a care and maintenance budget as you have proposed,” the letter from the DPE reads.
The BRPs told Fin24 that they were “currently evaluating” the impact of the latest development on the trade rescue process and would communicate any decisions in due course.
‘Money in a hole’
Econometrix economist and director Azar Jammine told Fin24 that at some point the government would realize that supporting an unsustainable airline was taking money away from other priorities. Faced with the pressures of the coronavirus pandemic and the need to redirect fiscal resources to increase testing, it was a good decision, he said.
“SAA barely works right now, other than flying rescue missions. They have no income. Therefore, the only way they can survive is by pouring more than billions of rand, which is like investing money in a hole.” Jammine said
SAA was placed on a voluntary commercial rescue in December and the government announced that it would take advantage of R4 billion from the airline to deal with its short-term liquidity problems until January 31, 2020. But of the R4 billion package, the The government was only able to secure R2 billion and SAA ran out of money in mid-January, forcing operations to stop.
Joint Venture Rescue Professionals (BRP) say the blockade, which banned air travel, forced the airline to apply for an extension of its foreign loans since it now had no income. BRPs said they are reviewing the situation after the government’s decision to deny the aid request.
In a letter to affected parties, which includes creditors and banks, BRPs said the airline is still operating, making charter flights to return South Africans to their homes and repatriate foreigners to various countries. They added that its cargo division operates unhindered during the shutdown to deliver critical medical supplies to the country.
SAA entered a commercial rescue shortly after a crippling strike in November 2019.
* Additional reporting by Carin Smith
