The Department of Public Enterprises (DPE) welcomed the outcome of the creditors’ vote on the proposed business rescue plan for State-owned South African Airways (SAA). The financially beleaguered national flag carrier has been under business rescue. In the vote on July 14, 86% of the creditors voted in favour of the plan. “The DPE believes that the favourable vote is a much better outcome for creditors and SAA employees than liquidation, and the government remains confident that the implementation of the business rescue plan will balance the rights and interests of all parties,” it affirmed.

“The priorities for the DPE are now to give effect to funding commitments by the government for the business rescue plan, appoint a new, and reconfigured, board for SAA,” it added. The department also announced that the interim SAA CEO will be Philip Saunders, whom it described as an “experienced airline executive with a strong commercial background”. Saunders would work with the interim board to create an interim management team. The interim board, CEO and management would then fundamentally restructure the airline.

The DPE assured that government was committed to arranging the financing necessary to implement the business plan. This included funding the voluntary severance packages for retrenched SAA employees, agreed with the unions.

Following the vote, the department also released the text of the remarks made at the creditors meeting by its acting director-general, Kgathatso Tlhakudi. He started by denying that the effort to save SAA had been a vanity project by the DPE or the National Treasury. He affirmed that rescuing the airline was good for the country. He assured that government and business rescue practitioners had made use of credible and internationally respected “resources” to help with the expertise needed for the rescue plan to succeed. He affirmed that the DPE had been “humbled by the support of organised labour”.

“We believe that an example for a responsible business transformation process has been set for the South African public and private sector,” he said. “The parties entered the process understanding everyone will have to give in a little to attain the bigger picture.”

Tlhakudi argued that the revival of SAA would be beneficial for the country for several reasons. He started by stating that the repatriation of South Africans stranded abroad and the transport of essential medical supplies had been possible because of the existence of SAA. He added that South Africa could not rely on airlines from other countries because they were also dealing with the Covid-19 emergency.

He further pointed out that, because of the long distances between the region’s economic centres, an effective air transport network was essential for the integration of Southern Africa. South Africa’s own economy depended on international trade and investment, and air transport was essential in facilitating this. And international tourism was extremely important for the economy, employment and conservation in the country.

“The restructuring is different from previous attempts at turning around the business,” he assured. “The old way of contracting for labour and services is being departed from. Productivity and efficiency will guide the performance system going forward. We need an SAA which will emerge from this restructuring and its subsidiaries to be attractive assets that will attract strategic equity partnerships and other business partners.”

He also assured that it would not be “too long a time” before government was able to announce the preferred strategic equity partners for the SAA group and its “various business units”. The appointment process for a transaction adviser, who would firm up the preliminary contacts between government and likely strategic equity partners, would soon be concluded.

“The business [rescue] model has catered for a responsible ramp-up of operations in response to the pandemic trajectory, which is due to peak in South Africa between August and September 2020,” stated Tlhakudi. “The base established will ensure a firm foundation for growth going forward.”