South African President Cyril Ramaphosa on Monday said the only financially viable option to secure a credible future for South African Airways (SAA) was to place the airline on business rescue, reported Reuters.
“The financial crisis had become so grave that the only way to secure its survival was to take this extraordinary measure,” Ramaphosa noted in his weekly newsletter. “With the support of lenders, government, management and workers, SAA will continue to operate while the airline undergoes the restructuring needed to make it a viable company.”
Last week it was also announced that SAA would undergo business rescue, after years of losses. Business rescue is a form of bankruptcy protection where a specialist adviser takes control of a company to restructure it.
SAA has not made any profit since 2011 and is deeply in debt. It has received more than 20 billion rand ($1.4 billion) in government bailouts over the past three years. Last month, a crippling strike pushed it to the brink of collapse.
The strikes announced by two of the airline’s largest employee unions over pay forced SAA to cancel hundreds of flights and contributed to the deterioration in its financial position.
Minister of Public Enterprises Gordhan told the Sunday Times that the government’s decision to put SAA in business rescue is aimed at saving thousands of jobs.
Years of corruption and mismanagement have put several state-owned enterprises including power utility Eskom in dire conditions. Eskom is also facing grave financial problems that have left the power utility struggling to keep the lights on.
President Ramaphosa said although many of the state-owned firms such as Eskom are deeply in debt, they remain valuable state assets with immense capacity.
“We will not allow any of these strategic entities to fail. Rather, we need to take all necessary steps – even drastic ones – to restore them to health,” he said.
