South African Airways to receive US$376m bailout to fund operations

SOUTH AFRICA – South Africa’s national airline SAA has announced that it is going to receive a government cash injection of US$376 million (R5.5 billion) at the end of September this year.

The airline’s officials in a presentation to law makers in early September however, revealed that SAA still needs more money to be able to effectively carry out its 2019/2020 operations.

In the presentation, SAA said it is in negotiations with lenders to make R2 billion available for working capital, adding that it would have to meet certain conditions to obtain the funding.

South African Airways (SAA) has debt of about US$868 million (R12.7 billion), consisting of US$629 million (R9.2 billion) of legacy debt and a US$239 million (R3.5 billion) working capital facility provided by banks.

Officials from SAA also told South Africa’s lawmakers that the airline requires US$ 136.75 million (R2 billion) by December to fund working capital for its 2019/20 financial year.

The airline has not been making any profits since 2011 and has largely relied on government bailouts to stay afloat.

In the 2018/19 financial year, the national carrier received a US$ 341.87 million ( R5 billion government) bailout to help it finance its operations and service its debts.

The state-owned flag carrier’s has long-term strategy to turn around the fortunes of the once successful and profitable airline. The strategy is based on an equity injection of nearly R22 billion.

Some of the measures that have already implemented by the airline include the abandoning of less profitable routes and the retirement of some of its old and less efficient aircrafts.

The airline also in July this year leased a new state of the art 2-engine aircraft to service its Johannesburg- New York route which was being served by the less efficient 4-engine airbus 340 aircraft.

The new aircraft is expected to help the airline reduce fuel costs on that route by up to 20 percent.

The government, the airline’s main financier, wants further cost reductions before committing more money during a time of weak domestic growth and is also considering how it might find a commercial partner for the airline.

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