- Click here to view the Scopa Presentation from May 15. (0.68 MB)
A press statement issued this week, which suggests that South African Airways (SAA) will resume domestic services by mid-June, is “incorrect” and in violation of SAA’s business rescue practitioners’ (BRP’s) communications protocol.
The protocol was put in place to ensure that unvetted releases are not issued.
In a statement on May 27, the BRPs noted that the position around the cessation of flights would remain as is until SAA has a better sense of what the level 3 lockdown means in terms of domestic air travel.
The airline also needs to consider what the opening up of the skies will mean from a commercial and load factor perspective, and the airline’s future funding also remains a key variable in all of the above considerations.
However, SAA is currently engaged in limited operation of charters for repatriations and cargo, as the Covid-19-related travel bans do not allow for any commercial flights.
“It is unfortunate that the unvetted press statement created an unfair expectation on our relevant stakeholders, including SAA’s customers, as well as employees, who are on unpaid [leave] as a result of the travel ban which led to the halting of the company’s operations and compounded its financial distress,” the BRPs lamented.
The BRPs focus is on the publication of a business rescue plan as outlined in the Standing Committee on Public Accounts (Scopa) update on May 15.
The attached Scopa presentation has a breakdown of all funds received during the business rescue process and the detailed expenditure of these funds up to April 27.
In the five months from December 2019 to April 2020, about R10-billion was used in the business rescue proceedings.
In a separate statement on May 27, Scopa noted that from the 2017 financial statements and the draft financial statements for 2018 and 2019 that the operating costs for SAA were at least R30-billion a year, amounting to a spend of R2.5-billion a month.
Therefore, from this perspective, the average monthly costs incurred to continue to operate SAA for the five-month business rescue period amounted to R2-billion a month, which Scopa said meant that the BRPs had therefore succeeded in reducing SAA’s operational costs by R500-million a month.
BUSINESS RESCUE PLAN UPDATE
A new post-Covid-19 restructuring plan has been developed to preserve the assets of the airline until SAA can reliably predict the income patterns of the future. For these reasons, Scopa said the care and maintenance proposals were presented to the shareholder, so that the restructuring plan could be finalised when there was more certainty in the aviation industry.
However, when the BRPs were notified that the shareholder would not fund a care and maintenance plan, the only option available to the BRPs was to propose a plan that would provide creditors with a better return, through a structured wind down, rather than liquidation.
During March, the BRPs and shareholder continued to engage on the route network for the restructured SAA in the hopes that finality on this issue would enable the sourcing of funding to implement the restructuring plan.
The draft business rescue plan for a restructured airline, which was nearly complete, could not be finalised owing the impact of Covid-19 which nullified all the assumptions that were included in the income projections which were used to build the “sustainable airline model”.
Discussions are now being held between the BRPs and the shareholder to possibly restructure the airline, and announcement in this regard will be made in due course as well as an agreed timeline for the consultation on the business rescue plan as well as its publication.
It is the considered view of the business rescue practitioners that there is still a reasonable prospect of rescuing SAA, subject to the receipt of unequivocal commitment thereto and the requisite funding. This will be set out in the business rescue plan to be published in due course.