The board at embattled national carrier South African Airways (SAA) has confirmed that further direct government support will be needed to help it overcome its current liquidity crisis, as well as to enable it to complete the implementation of its long-term turnaround strategy.

At a briefing convened following the shock resignation of former CEO Vuyani Jarana – whose damning resignation letter, outlining his frustration at the lack of shareholder support, was leaked to the media last week – the board said the airline had to be “appropriately capitalised”, as its current debt burden was unsustainable.

SAA has already received several direct bail-outs amounting to billions of rands over the past number of years, the most recent being the R5-billion injection received in October. It has also sustained its going-concern status only as a result of those fiscal transfers and by raising funding off the back of government guarantees.

By the end of July, however, a R3.5-billion bridging loan secured earlier this year from South African commercial banks had to be repaid, while longer-term debt of R9.2-billion would also mature. SAA’s total outstanding debt stands at R21.7-billion.

The airline also requires an additional R4-billion in immediate liquidity to enable it to finalise outstanding financial statements as a going concern and to continue operating until the 2021/22 financial year, when SAA is expected to return to profitability.

SAA has not made a profit since 2011.

The chairperson of the board’s turnaround strategy committee, Martin Kingston, explained: “We cannot continue if we are burdened with inappropriate levels of debt – we need to be appropriately capitalised. That means there would need to be an injection by the shareholder [and] the shareholder is acutely aware of this, but they have many demands on a limited purse.”

During the past week alone, SAA held four separate meetings with its shareholder, represented by the Department of Public Enterprises and the National Treasury, to finalise a funding structure that would be in line with what was required to complete the turnaround.

Acting CFO Deon Fredericks reported that a meeting had also been held with its current domestic lenders, as well as a pool of foreign lenders, which had all indicated a willingness to support SAA on condition there was visibility of government’s ongoing support.

Kingston reported that talks were at an advanced stage with lenders concerning SAA repaying the R3.5-billion bridging loan and also extending the R9.2-billion over a protracted period.

“Repaying the R3.5-billion also opens the door for us to access additional liquidity for the current financial year,” he added, explaining that an additional R4-billion would be required to take the airline to 2021/22, when SAA should return to profit.

“The lenders, if they are going to advance further capital, need to be assured of the fact that their existing exposure, if it is to be restructured, [will be] repaid when it is supposed to be repaid.”

Board chairperson JB Magwaza also used the briefing to announce the appointment of Zukisa Ramasia as acting CEO from June 10. As a result, Jarana would no longer serve out his notice period to the end of August.

The post of CEO would be advertised domestically and internationally and the board would seek to move fast to secure a permanent replacement for Jarana.

Magwaza also confirmed that Adam Voss had been appointed CEO of SAA Technical and that the board was close to finalising the appointment of a permanent CEO at SAA’s low-cost carrier, Mango.