South African Airways (SAA), one of Africa’s iconic airline, which currently operating under-loss, could resort in cutting-routes to save the state-owned flag carrier, SAA rescue team revealed.
Several news outlets, including Bloomberg, noted that SAA administrators have defended their decision to cut-routes, even after several objections from South African President Cyril Ramaphosa, the government and labor unions.
According to a report by Reuters, under South African company law, the business rescue team is entitled to take decisions that are deemed necessary to turn a distressed company around, independently of government. In theory, it could ignore the government’s objections.
Bloomberg reported that South African Airways will halt service to nine international cities, including Hong Kong and Sao Paulo, and cease all local services except those between Johannesburg and Cape Town.
The move is “in the best interests of SAA,” joint administrators Les Matuson and Siviwe Dongwana said in an emailed statement Sunday.
“They are intended to make the airline commercially and operationally sustainable, free from the requirement of future funding from the government post the implementation of the restructure,” the administrators said.
However, Reuters reported that Specialists appointed to try to rescue SAA said on Thursday that SAA would cease flights to Durban, East London and Port Elizabeth from Feb. 29, as well as cutting some international routes, as part of efforts to conserve cash and make the airline more attractive to potential equity partners.
Hence, the Sunday Times reported that South African banks have declined to provide a $531 million loan to enable a comeback even if the government guaranteed the funding.
A loan offered by an international bank with links to the U.S. and U.K. was denied because it was too low, according to the newspaper.
READ:South Africa economy to grow by 1.3 per cent in 2019
In addition, Bloomberg noted that, on Friday, Ramaphosa said the government disagreed with the decision to cut almost all domestic routes because the carrier is an “economic enabler” that allows people to move around the country.
“SAA is not only a great symbol for the country, but it is also an economic enabler,” President said.
The South African Public Enterprises Minister Pravin Gordhan said the government would propose the cuts be reviewed as they may jeopardize SAA’s long-term future.
The administrators said they would engage with stakeholders and include their input in a final business rescue plan due at the end of the month.
They took control of the carrier in December after it was placed into a local form of bankruptcy to try to end a cycle of regular state bailouts and battles with creditors.
The state-owned carrier failed to generate profit since 2011 and has received over $1.3 billion in bailouts over the last three years.
Also, the team appointed to rescue SAA said that, flights to Cape Town will continue on a reduced basis.
Meanwhile, SAA has recently acquired and debuted its new first-generation aircraft the Airbus A350-900 XWB, one of the newest aircraft from the European manufacturer, that will replace the quad engine Airbus A340-600.
