SAA business rescue practitioners say progress on aircraft leases, but 'dire' financial state

10th September 2020

By: Rebecca Campbell

Creamer Media Senior Deputy Editor

     

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The business rescue practitioners (BRPs) for State-owned national flag carrier South African Airways issued, on Thursday, an update notice on the business rescue process. The business rescue plan for the airline was published on July 28.

In their update, the BRPs stated that they were busy concluding two essential issues, without which the plan could not be implemented. These were the termination of aircraft leases and the obtaining of the funding required to execute the plan.

The aircraft lease issue had been almost settled. The ending of these leases was essential to free SAA from “overly burdensome contracts” that were not congruent with the airline’s requirements during or after the implementation of the business rescue plan.

Of the 40 aircraft leases entered into by SAA, termination agreements had been reached for 33 of them. The termination of the remaining seven would hopefully be achieved by the end of this month, otherwise the BRPs would have to start legal proceedings to cancel them, because they were “onerous”.

Regarding the issue of funding, the implementation of the rescue plan required short-, medium-, and long-term funding. Concerning the short-term funding, the government had already provided R9.3-billion to pay SAA’s creditors. More was required but the government had, in continuing discussions with the BRPs, committed itself to supplying the rest of the necessary funding, sometime next week. 

“The issue that the BRPs have to deal with at this point in time, concerns the existing funds which are available for operational expenditure, which are near depletion and thus the availability of the requisite funding to the company during the course of next week will determine whether the business rescue proceedings can continue,” stated the BRPs in their notice. “Accordingly the BRPs have found it prudent to advise affected persons of the company’s dire financial position.”

The BRPs assured that they would, on September 17, inform those affected by SAA’s business rescue process of the progress made in securing the funds needed by the airline. If they were not satisfied that enough progress had been made, they would convene a creditors’ meeting on September 18 to discuss the issue and proposals for the way forward.

Edited by Creamer Media Reporter

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