Wednesday, 16 May 2018

SOUTH AFRICA: South African Airways Expecting $400 Million Capital Injection From Government

South African government has promised another $400 million capital injection into failing airline South African Airways.

This comes after CEO Vuyani Jarana told the government in April that they needed a capital injection urgently.

Jarana said that the government has committed to inject another 5 billion rands into SAA. Part of that 5 billion rands we will repay some of the creditors, suppliers, then the balance will support us for working capital until around October/November.

The Treasury of the South African Government confirmed in a statement that the outcome of this process is expected to be finalized in time for the 2018 MTBPS (Medium Term Budget Policy Statement).

This statement will be presented to parliament in October.

The Government also added that South African Airways needs a private equity partner to fund the airline further as the parliament shouldn’t need to be bailing them out all of the time.

The airline did concede that job losses will have to be implemented in their current workforce of 10,000 people, saying it was inevitable.

Jarana said that The first priority for me is job preservation, how do you find alternative jobs for people as a starting point before you go into the hard issues of retrenchments?

South African Airlines is to receive a $400 million capital injection from the Government of South Africa.

This is all subject to Treasury approval by October 2018.

Jarana’s ambitions for the airline is to break even within three years as well as being able to pay for their operations without needing handouts from the government.

SAA has not produced a profit for seven years and has received up to 20 billion Rand in state support already.

SAA claims that the $400 million is needed to prop up the business, pay off debts as well as implementing a turnaround plan.

It remains to be seen what the turnaround plan consists of and whether it will produce the results the airline needs and what the government wants so then payback of the bailout and can begin in due course.

Whether cutbacks are going to be needed seems very likely, but it is a promising sign for the employees that Jarana’s priorities in the cutbacks are job preservation and not just the straight-out redundancies that are on everyone’s minds.

Tourism Observer
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