The Board of Directors of South African Airways (SAA) announced this week that it has adopted a resolution to place the company into business rescue at the earliest opportunity due to the airline’s ongoing financial troubles.
Business Rescue is South Africa’s version of the U.S. Chapter 11 process, which is designed to prevent a company which is no longer profitable, from being forced to shut down.
The process will allow SAA to continue operating in an orderly manner, while keeping planes and passengers flying. SAA’s existing lenders will pitch in 2 billion Rand, while South African government will provide the airline with another 2 billion Rand, totaling the equivalent of $272 million.
“This is the optimal mechanism to restore confidence in SAA and to safeguard the good assets of SAA and help to restructure and reposition the entity into one that is stronger, more sustainable and able to grow and attract an equity partner,” said P.J. Gordhan, the Minister of Public Enterprises for South Africa.
“Our desire is that the restructured airline will mark the beginning of a new era in South African aviation and must be able to bring in millions more tourists into SA; help create more jobs in tourism and related sectors of the economy and work with other African airlines to underpin and service the integration of African markets and improve dramatically intra-African trade and travel,” said Gordhan.
As part of the arrangement SAA has to appoint a business practitioner to oversee the airline’s operations, which, according to the board, they will select in the near-future. Despite the airline’s insolvency, services operated by SAA’s subsidiary airline, Mango, will continue as scheduled.
The company’s board stated that further details will be announced in the future. “SAA will endeavor to operate a new provisional timetable and will publish details shortly. The company greatly appreciates the continued support of both its customers and partners in the travel industry around the world,” said SAA in a statement.