South African Airways (SAA) is undergoing a “radical restructure” as it goes into a bankruptcy protection scheme in a bid to avoid going bust.
A new statement from Pravin Gordhan, minister for the department of public enterprises, said the decision to place the national airline into “business rescue” is being fully supported by the government.
The procedure is used in South Africa to try to turn around a company that is in serious trouble and sees a business rescue practitioner appointed to run and restructure the business while the airline continues operations normally.
Gordhan 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.
“Our desire is that the restructured airline will mark the beginning of a new era in South African aviation and must be able to bring in millions more tourists into SA, help create more jobs in tourism and related sectors of the economy and work with other African airlines to underpin and service the integration of African markets and improve dramatically intra-African trade and travel.
“It is also important that the reliance on government finances be reduced as soon as possible and to minimise disruption to SAA services, customers, staff and other stakeholders.”
Gordhan added the arrangement will see a number of moves made on behalf of the airline.
He said its existing lenders would provide R2 billion (£52 million) as post commencement finance, guaranteed by the government that is also putting in the same amount.
The business rescue practitioner will also ensure “the full recovery of capital and interest on existing debt provided to SAA by existing lenders that is the subject of existing government guarantees will not be impacted by business rescue”.
Gordhan added the opportunity would be taken to critically review the cost structure of the airline while safeguarding as many jobs as possible while also ensuring its reorganisation will leave it better positioned to be “sustainable and attractive to an investment partner”.
He said: “It must be clear this is not a bailout. This is the provision of financial assistance in order to facilitate a radical restructure of the airline.
“This initiative demonstrates that government will undertake the necessary bold steps in order to reposition its assets in such a way that they do not continue to depend on the fiscus and thereby burden taxpayers.”
The news about the airline comes after a decade when it has received a number of government bail outs to keep afloat while a number of chief executives have come and gone from the role.