The Department of Public Enterprises (DPE) issued a statement on Friday expressing its concern about the direction that the business rescue process for State-owned regional airline SA Express was taking. “[T]he Business Rescue Practitioners [BRPs] are planning to ‘ground’ the airline without first presenting the shareholder and stakeholders with a comprehensive and feasible Business Case for the immediate stabilisation of the airline,” it said.

The BRPs presented their business rescue plan to senior DPE officials, including the acting director-general during this week. “The Department informed the practitioners that the business rescue plan presented was wholly inadequate and did not include key commercial elements that would enable the Department to make a business case for the provision of Post Commencement Finance (PCF) to the National Treasury.”

The DPE was engaging with the National Treasury to obtain the PCF, either in the form of cash or a government guarantee. The DPE had informed the BRPs of this. This was because the business rescue process needed the PCF to be completely operational.

The DPE stressed to the BRPs that government funds were “constrained”. But the National Treasury was “fully engaged” with the issue and comprehended the “severity” of the circumstances. It urged the BRPs to “vigorously” pursue the option of a strategic equity partner for the airline, should any show interest in taking a stake in SA Express.

The Department advised the BRPs to hold talks with the airline’s board, management, unions and all stakeholders, and make use of their skills, to elaborate a business case that could be submitted to possible sources of PCF, including the National Treasury. The DPE statement affirmed that the BRPs agreed to this and further said that they would return some strategic and operational responsibilities to the board and management of the airline.

The DPE urged the BRPs to include five elements in their interim restructuring plan. These were – options for restructuring; implications for the airline’s assets, staff, fleet, routes as well as regulations and costs; the financial model; funding options; and a brand recovery plan. “The Department is of the view that there is still a rationale for SA Express to play a critical role as a feeder airline to service secondary routes and key cities in the Southern African region, however the BRPs with Board and Management need to firm up the commercial case to enable funders to provide PCF.”