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There is still a reasonable prospect of rescuing struggling flag carrier South African Airways if the money to do so is provided, the state-owned airline's business rescue practitioners said in a letter to affected parties on Wednesday.
In terms of the business rescue process, affected parties include creditors, the government and employees.
The practitioners, Les Matuson and Siviwe Dongwana, say in the letter that they are in discussions with government - as SAA's shareholder - on how the airline could be restructured. An announcement will be made in due course.
At a briefing to Parliament's standing committee on appropriations on Wednesday night on the financial challenges the airline is facing, a representative of the business rescue practitioners, Bongani Nkasana, indicated that the long-awaited restructuring plan is due to be published on Friday.
He told MPs the practitioners themselves could not take part in the online committee briefing as they were busy finalising on the plan.
The committee was told that SAA had R1.2 billion cash in the bank. Of that, R600 million is ringfenced and relates to an unflown ticket liability.
"Of the people who already booked flights via SAA, via Airlink and via SA Express, the monies get ringfenced before they fly so that if refunds are requested – the airline is able to pay back," Nkasana explained.
"The airline has R600 million in the bank, but R1 billion in liabilities." About R580 million is owed for the leasing of planes for April, and R500 million owed to other creditors, he said.
Proposals submitted
According to the letter to affected parties, the practitioners presented a restructuring plan to government in January. It detailed retained routes, the number and type of aircraft to be retained, anticipated job losses and funding requirements.
"Once the shareholder made its choice, we accelerated the implementation of cost cutting mechanisms including renegotiation of leases, the suspension of flights on all loss-making routes as well as embarking on a section 189 consultation process," the practitioners say.
"The additional funding for the chosen restructuring plan was expected to be announced in the 2020 national budget speech. However, this certainty was not forthcoming in the budget in February 2020 as was anticipated."
When the Covid-19 pandemic hit in March leading to all SAA aircraft being grounded by travel bans, the practitioners submitted a care and maintenance plan to government instead.
The plan was based on the suspension of all supplier contracts not needed at that stage, and the completion of a section 189 retrenchment process of all employees.
This proposal was rejected by government, which furthermore indicated by mid-April that there will be no more money provided for the rescue process, according to the practitioners.
This led the practitioners to propose a plan that would provide creditors with a better return through a structured wind down, rather than liquidation.
Currently SAA only operates charters for repatriations and cargo on an ad hoc basis.
READ: Confusion at SAA as business rescue practitioners say flights might not resume next month
Minister of Public Enterprises Pravin Gordhan told Parliament in a previous briefing that he is questioning the way the business rescue practitioners have been spending the R5.5 billion post-commencement funding received.
Various consultancies had been brought in without evidence of what they had actually done, Gordhan said. He wanted full access to all of that information to evaluate whether it was value for money.
Gordhan also called on the business rescue practitioners and all the consultancies that they have brought in to reduce their fees by up to 40%.
The practitioners say in their letter to affected parties, shared with committee members on Wednesday evening, that they used about R10 billion over the five months from December 2019, when SAA went into business rescue, to April this year. At an average monthly spend of about R2 billion, this is R500 million less per month than the estimated spend of R2.5 billion per month based on the 2017 and draft 2018 financial statements of the airline.
There were no funds to pay salaries for May, and all SAA employees were placed on unpaid absence with effect from Friday 1 May 2020, irrespective of positive leave balances and even if employees were willing to cut salaries. Covid-19 UIF TERS payments have been applied for in this regard.
It is as yet unclear whether SAA will be able to start domestic flights again in June. While its commercial division seems to be under the impression it will be possible, the practitioners have since said that it looks unlikely.
Fin24 reported earlier on Wednesday that former SAA chair Dudu Myeni has been declared a delinquent director in terms of the Companies Act. Nkasana informed the committee that the Special Investigating Unit (SIU) is currently conducting investigations at SAA on offences and contracts of the past.
