• SAA's business rescue practitioners have presented a new plan for the airline.
  • It includes billions more in taxpayer money, and the retrenchment of 3,700 employees.  
  • Under the new plan, SAA also won't fly to East London any more, and international routes have been cut. 
  • For more articles, go to www.BusinessInsider.co.za.

After a long wait, the business rescue practitioners of South African Airways finally presented their plan for the bankrupt airline on Tuesday night.

Government issued a curt statement in response, supporting the plan “where it results in a viable, sustainable, competitive airline” – but also expressing concern that it did not “adequately accomplish” the restructuring of SAA “by stemming the tide of wastage, an excessive cost-structure and cash burn”.

READ | EXPLAINER: How SAA landed in such a mess

Apart from liquidating the airline, there are few other options than following the plan, though. 

There doesn’t seem to be any immediate hope of another investor who may be interested in buying a stake in SAA or one of its companies. While the business rescue practitioners have approached two potential strategic partners for SAA, "these engagement took place pre-Covid and would be revived once the global aviation industry is back on its feet”. The CEOs of Boeing and the International Air Transport Association don’t expect the industry to recover before 2023.

Instead, the plan expects taxpayers – who have already forked out R16.5 billion in bailouts over the past decade – to invest around R26 billion in the airline. 

This will help repay SAA’s debts (some creditors will only get 7.5c for every rand they lent SAA, though) and what it owes on airplane leases, as well as cover the costs for severance packages and to restart the airline. Government will also be expected to cough up money to honour unused SAA tickets during lockdown.

The plan will now be submitted to creditors, who are expected to accept it. The alternative - liquidation - will leave them with nothing. But Treasury will also have to make space for the required SAA injection in its budget. Finance minister Tito Mboweni will present an emergency budget - to deal with the Covid-19 fall-out - on 24 June, and the SAA provision will have to be included.

Here’s what else has been included in the business rescue plan for SAA:

Staff

From 4,708 employees – of which 617 are pilots and 1,516 are cabin crew – SAA will retrench all but 1,000 of its workers (which include staff at Mango, SAA Technical and Air Chefs). Government will be asked to fund R2.2 billion in severance packages.

But the business rescue practitioners think that as SAA starts expanding its operations, it would need a “final staff number” of 2,892 employees. Retrenched employees will be able to apply for jobs as they become available.

Routes

The business rescue practitioners found that only eight routes delivered a net profit - one international and seven regional. None of the domestic routes made money.

Still, the plan sees the restructured SAA flying between Cape Town, Durban and Port Elizabeth – but dropping East London.

On the international routes, it won't fly to Hong Kong, Munich, Sao Paulo and Guangzhou any more.

It will still fly overseas to:

  • Washington (via Accra)
  • New York
  • Frankfurt
  • London
  • Perth (dependent on available fleet)

The only regional route it will cancel is Abidjan (via Accra) - and it will add Libreville.

The other proposed regional routes are:

  • Accra
  • Blantyre
  • Dar es Salaam
  • Entebbe
  • Gaborone
  • Harare
  • Kinshasa
  • Lagos
  • Lilongwe
  • Livingstone
  • Luanda
  • Lusaka
  • Maputo
  • Mauritius
  • Nairobi
  • Ndola
  • Victoria Falls
  • Windhoek

Planes

SAA owns nine of its airplanes (five A340-300 planes and four A340-600 planes) and leases 35 other planes.

In the period between July and February 2021, it will only use six of these planes, which will gradually be increased to 26, according to the plan.

When will SAA start to fly again?

With Mango already flying, the business rescue practitioners expect that SAA could restart domestic flights during level 3 and 2 of the national lockdown, with international travel restarting under level 1.

The full domestic network of flights should be in the air by January next year, while regional and international flights will be introduced as demand allows.

Receive a daily update on your cellphone with all our latest news: click here.

Get the best of our site emailed to you daily: click here.

Also from Business Insider South Africa: