CAPE TOWN (Reuters) – South African Airways (SAA) has spent just under 10 billion rand ($540 million) since it entered a form of bankruptcy protection, business rescue practitioners said on Friday as they flagged a structured wind-down process as their preferred option for the carrier.
FILE PHOTO: A South African Airways (SAA) plane is towed at O.R. Tambo International Airport in Johannesburg, South Africa, January 18, 2020. REUTERS/Rogan Ward
The troubled state-owned airline, which has not made a profit since 2011 has been burning cash and is dependent on government bailouts to remain solvent. It entered business rescue in December in a last-ditch bid to save the company.
“In terms of the amount of money that has been utilized… by the airline from the fifth of December to the end of April we indicate that the total spend was 9.9 billion rand,” Siviwe Dongwana, joint business rescue practitioner appointed to turn around SAA, told lawmakers on Friday.
A fifth of the money was spent on aviation fuel and 16% went on salaries and allowances, he said, referring to some of the major expenses incurred during this time.
Administrators at SAA said in the absence of extra funding the best way forward might be to run a structured wind-down of the business rather than liquidation, which opposition parties have called for.
“There is no question of doubt in my mind that a liquidation process would materially erode value and the net recovery for creditors could be an absolute disaster,” said Les Matuson, joint business rescue practitioner at SAA, when answering questions from lawmakers.
Early this month South Africa’s Labour Court ordered a halt to layoffs at the ailing airline, siding with two trade unions who had argued that the airline’s administrators had acted unfairly.
On Wednesday, the administrators, who have no previous aviation experience and are under pressure to produce a restructuring plan after being in the job for five months, said they would not sell assets for an interim period without involving the government.
SAA has received bailouts worth more than 20 billion rand over the past three years.
It is running low on cash after the coronavirus pandemic forced it to halt all commercial passenger flights and the government told the administrators it would not provide further funding.
Reporting by Wendell Roelf; Editing by Louise Heavens and Susan Fenton