SAA will be using incoming capital to boost its subsidiaries
SAA will be sharing the proposed transfer of R2.7 billion with its subsidiaries in order to help them boost their financial position as the airline emerges from the business rescue process.
The Department of Public Enterprises (DPE) yesterday told Parliament that the success of SAA’s business rescue plan depended on the financial and operational health of its subsidiaries.
DPE acting director-general Melanchton Makobe said SAA subsidiaries were facing financial challenges due to SAA being put into business rescue in December 2019. SAA was allocated a R10.5 billion bailout to cover its business rescue process, which was concluded at the end of April.
Makobe also said that Covid-19 restrictions imposed on international and domestic travel had impacted on SAA subsidiaries’ operations.
“If you look at the business rescue plan, it recognises the deteriorating financial position of subsidiaries and indicates that the success of the business rescue plan is dependent on the financial viability of subsidiaries,” he said. Makobe said that SAA Technical would receive R1.6bn to cover its restructuring and right-sizing.
The entity has been suffering from declining revenue, which has not been sufficient to cover fixed monthly costs and partial payment of salaries
Low-cost carrier Mango would receive R819 million to help with restructuring, paying off debt and providing working capital.
Mango’s cash inflow is currently less than cash outflow, and is therefore deferring payments to meet critical payments. Air Chefs would receive R21m for restructuring following continued losses as revenue remains insufficient to cover costs.
Meanwhile, the DPE has pushed by another month in concluding the deal with a new strategic equity partner for SAA after last week promising to clinch the deal by next month.
DPE Deputy Minister Phumulo Massuale said the department would sign an agreement with a strategic equity partner within the next eight weeks. The department is in final discussion with the equity partner as the parties are conducting due diligence.
Massuale said once the process was finalised and the preferred strategic equity partner was identified, an announcement would be made.
“That process is near the end right now,” Massuale said. “Due diligence has led us to the point where we can say in the next six to eight weeks that the process will be concluded.”
R2.7bn with its subsidiaries in order will help them boost their financial position as the airline emerges from the business rescue process.
The DPE told Parliament that the success of SAA’s business rescue plan depended on the financial and operational health of its subsidiaries.
