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South African Airlines to receive another government bailout

Oct 25, 2018

Alan Dron

South African Airways (SAA) is in line for another government bailout as part of a restructuring initiative aimed at restoring profitability by 2020-21. More cash is also in the works for regional carrier SA Express.

Presenting his Medium-Term Budget Policy Statement to the South African parliament Oct. 24, finance minister Tito Mboweni said the situation at the cash-strapped carrier was improving, but that further state aid would be required.

“In the past year‚ almost all of the regional and domestic routes operated by South African Airways have become profitable. SAA will reduce and ultimately stop operating loss-making international routes.

“SAA procurement has unlocked annual cost savings of R400 million ($27.8 million). Despite these efforts‚ SAA is still loss-making and even more radical measures need to be undertaken. There should be no holy cows! To support a sustainable reconfiguration of our airline portfolio‚ in 2018/19 government will provide additional funding for SAA and South African Express Airways.”

Local media reported this would involve an extra R5 billion to help SAA pay off imminently maturing debt and that SA Express would receive a further R1.2 billion.

“Minister [of public enterprises Pravin] Gordhan and I are working closely to limit the fiscal cost of these measures. By the end of the year‚ the boards of these two companies will present plans to strengthen and align their operations.

SAA has only survived through a series of government cash infusions in recent years.

According to Reuters, Mboweni added it was unlikely the government would find an investor to take an equity stake in SAA.

“I doubt you are going to find an equity partner who will come into SAA in this current state. As an equity partner you’d have to immediately assume debt of some 21 billion rand ($1.5 billion).”