SAA flies into business rescue headwind

After a week of speculation on loss-making SAA’s future, the airline is to be placed in business rescue, the government announced yesterday. Public Enterprises Minister Pravin Gordhan said that business rescue was the best way of avoiding a disorderly implosion of the airline, notes a Business Day report. ‘Legal processes are under way to consider placing SAA in business rescue because at this stage that is the best way in which to reposition and restructure the airline into a sustainable entity that is not dependent on the fiscus,’ Gordhan is quoted as saying. ‘As soon as the decisions are made, a business rescue practitioner will be put in place and from that point on the business rescue practitioner will run the airline and will consider the steps that need to be taken so that the end result of the restructuring process is a viable, financially stable and operational entity,’ Gordhan said. He said SAA had, on this basis, secured the necessary funding to enable it to continue trading. These are to be announced in due course. He did not elaborate on these arrangements, but they could entail either a loan guarantee from the Treasury or a commitment by commercial banks to restore lending or a combination of the two. Business Day notes the company burns about R500m a month. Financial statements that were leaked this week showed that the company made a cumulative loss of R10.4bn over the past two years. Two weeks ago, trade union Solidarity filed papers in the Gauteng High Court (Johannesburg) requesting, as an interested party, that the court place the airline in business rescue. The National Union of Metalworkers, which led a week-long strike over wages, has said it was considering joining the application.

Full City Press report

Deputy Judge President Phineas Mojapelo is expected to lead a meeting today between the legal teams of Solidarity, SAA and government Ministers to discuss the case and a possible court date, according to Solidarity's chief operating officer, Dirk Hermann. He reportedly told Fin24 that, in terms of the legal processes that govern business rescue proceedings, it is not just up to SAA or the government to declare they are going to institute voluntary business rescue, as Solidarity was ‘first in the door’ with their application. He said the union does not intend to withdraw it. In a separate statement issued last night, Hermann said the government's decision was not voluntary, but was taken in reaction to the union's earlier application. ‘They are probably now trying to obtain control over the process after they realised that Solidarity will succeed,’ he said.

Full Fin24 report