South Africa agrees to $1.2 Billion bailout of national airline

The administrators running South Africa’s embattled national airline proposed the government provide a 21 billion rand ($1.2 billion) bailout to help repay debt and resume operations after the lifting of Covid-19 travel bans.

The plan includes about 17 billion rand that will go toward repaying South African Airways creditors, according to a draft copy seen by Bloomberg. As much as 2 billion rand will be used for retrenchments and a further 2 billion rand will be provided for working capital.

The draft plan “is for discussion purposes only and we await comment from the affected persons,” a spokeswoman for the administrators said, adding that the team has until June 8 to finalize a rescue proposal.

South Africa’s Public Enterprises Ministry, which is responsible for SAA, has not yet discussed the draft plan, spokesman Sam Mkokeli said by phone. The National Treasury said earlier this year it would allocate funds to repay creditors as the airline’s debt is government guaranteed.

While the funding agreement has yet to be finalized, a deal of this nature would bring to an end an impasse between the government and SAA’s business-rescue team over the airline’s future. The administrators, appointed in December, had an earlier request for state funding rejected in April, and subsequently proposed firing the entire workforce to stave off liquidation.

Public Enterprises Minister Pravin Gordhan strongly objected to that plan, and announced his ambitions for the creation of a new airline at the start of the month, kicking off a fresh round of talks.

SAA’s commercial passenger planes have been grounded since late March, when the government closed borders for non-urgent travel to contain the coronavirus. Some domestic flights are being allowed to operate as of Monday for business purposes, though SAA had previously reduced its local services to a single Johannesburg-Cape Town route.