South African Airways to get state-led rescue package

South African Airways to get state-led rescue package

South African Airways to get state-led rescue package

Perennial losses have been blamed on incompetent leadership, corruption, as well as adverse market conditions leading the airline to require ZAR22 billion (USD1.5 billion) worth of funding from the government, its sole shareholder. SAA has lost about 28 billion rand ($1.9 billion) over the past 13 years, leaving it reliant on bailouts to survive - a situation Finance Minister Tito Mboweni says can't be allowed to continue.

SAA spokesperson Tlali Tlali said the company's board will announce the appointment of business-rescue practitioners in "the near future".

"The considered and unanimous conclusion has been to place the company into business rescue in order to create a better return for the company's creditors and shareholders", SAA spokesman Tlali Tlali said in a statement.

The rescue plan will include a "new provisional timetable" and ensure "selected activities. continue operating successfully".

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South Africa's Companies Act enables businesses in financial distress or trading under insolvent circumstances to file for business rescue.

Cape Town - South African Airways (SAA) is likely to get a R2 billion boost from the government and another R2 billion from existing lenders as it enters rescue proceedings from December 5, a minister said on Thursday.

The letter stated that the only "viable route" was for SAA to "urgently" go into voluntary business rescue to avoid an "uncontrolled implosion of the national airline".

While the airline said the losses incurred during the strike were not the only factor contributing to this latest decision it did speed up the process. Recent airline estimates have put the cull at 944 jobs out of a total of 5,146 staff.

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Once a resolution has been adopted, a business rescue practitioner is appointed to reorganise and restructure the business.

In a business rescue, a financially distressed company like SAA is placed under the temporary supervision of a specialist practitioner with the aim of rehabilitating the company to improve its chance of survival. The ANC is South Africa's ruling African National Congress.

Government has been averse to allowing SAA to collapse given the billions of rands in liabilities that would suddenly become due given the bulk have been underwritten by state-backed guarantees.

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