South African Airways Gets $564 Million State GuaranteesXola Potelwa
South African Airways will be provided an additional 6.5 billion rand ($564 million) in state guarantees, taking funding pledges to more than 14 billion rand, according to the National Treasury.
The national carrier must provide the ministry with comprehensive details of its 90-day action plan intended to restore solvency as part of conditions attached to the guarantee, the Pretoria-based Treasury said in an e-mailed response to questions on Thursday. The airline’s strategy must be stress tested by the government and SAA and it has three months to present a new structure, fleet strategy and plans to reduce costs, while improving governance, the Treasury said.
SAA is technically bankrupt and surviving off state- guaranteed loans as an aging fleet and unprofitable long-haul routes contribute to heavy losses. The Johannesburg-based airline presented a 90-day rescue strategy to the government last year that includes 1.3 billion rand in annual savings.
The additional guarantees resolve questions raised by SAA’s auditors over the ability of the airline to continue operating as a going concern and will enable the company to release financial statements, Johannesburg-based Business Day reported today, citing Finance Minister Nhlanhla Nene.