South African Airways in "Business Rescue" as from 05 Dec 2019

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Passenger
Posts: 6361
Joined: 06 Dec 2010, 20:54

South African Airways in "Business Rescue" as from 05 Dec 2019

Post by Passenger » 28 Nov 2019, 20:52

There have been a few posts in other topics about their financial problems, specially after their huge strike last week (2 days for international flights, 6 days for domestic travel). And today, retailer Flight Centre South Africa (235 businesses, 1.200 employees) has stopped selling SAA tickets. Reason: their insurer doesn't give cover anymore for SAA. The risk becomes too high.

The South African government, 100% owner of SAA, urgently has to give them another 'loan' of R2bn = 122 mio Euro, needed for salaries and overdue suppliers.

Never before there was such a crisis at SAA, once the proud airline with callsign Springbok (Vlieënde Springbok / Flying Springbok).

Sources:
https://www.fin24.com/Companies/just-in ... t-20191128
and
https://www.fin24.com/Companies/saa-str ... s-20191127
and
https://www.businesslive.co.za/bd/natio ... s-or-dies/
and
http://www.tourismupdate.co.za/article/ ... -decisions
Last edited by Passenger on 06 Dec 2019, 07:10, edited 3 times in total.

TLspotting
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Re: South African Airways: ongoing rumours about financial woes

Post by TLspotting » 28 Nov 2019, 21:55

Not really rumors as FT made an article about it as well.
I'm Thibault Lapers, spotter in Belgium for now 3 years, but not yet across the world and a huuuuuge aviation geek ! Join me on Facebook & Twitter @TLspotting

Matt
Posts: 92
Joined: 14 Nov 2018, 09:20

Re: South African Airways: ongoing rumours about financial woes

Post by Matt » 29 Nov 2019, 12:36

Indeed. Not really rumours anymore. I have been following the situation for a while now ( I have SA roots ) and things are not looking good at all.

If Ramaphosa decides to stop the bailouts ( which is currently set at about 1.90 bilion rand ~rougly 130 million dollars ) it's over.

And from a pure financial standpoint I would understand why they would let the ship sink. Public opinion also seems to sway that way. The SA governement is losing billions of Dollars on the once proud Springbok. The only profit making destinations are Frankfurt and Munich. ( and even FRA is limited due to LH )

Heck, they where even more profit making in the days of Apartheid! ( which says something due to the limitations they had back then )

To have an idea about their load factor: British airways flies twice daily to JNB on the LHR-JNB route. Twice with an A380. On top of that they offer LHR-CPT once daily with a 747 and seasonal daily with a 777 between LGW-CPT. And they have a Durban flight with a 787 thrice weekly.
These have an almost full load factor. SAA does the LHR-JNB route once daily with an almost empty A330-300. They stopped CPT red eye's ages ago. Hong Kong is loss making, the JNB-JFK flights are purely there to show 'look guys, we fly to the USA, we are cool now!'. ( Delta is making more profit on their ATL-JNB route FYI )
Perth: loss making, Sao Paolo: loss making.

Even domestically they are losing the war to Mango, Kulala and British Airways ( their affliate Comair )

Their biggest mistake was joining Star Alliance IMO since they have a much stronger bond with the UK than any other country. One World would have been ideal. Since they joined star alliance, they lost the war on the JNB-LHR route to BA and had to axe their CPT-LHR route. ( and shortly after, their CPT-FRA route ) the rise of the A3 in the middle east and Ethopian airways growing so fast didn't help either.

SAA is still alive because of the 'Status' it gives the SA governement. But a 2nd Sabena is closer than one might think...

Passenger
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Re: South African Airways: ongoing rumours about financial woes

Post by Passenger » 29 Nov 2019, 16:44

Last Tuesday, the problems at South African Airways (and at SA's electricity company Eskom) were discussed in the parliament. And with just one political party in the majority, the only that is relevant, is what their politicians said. And they all support a new bailout by the government. From news24.com:
"...African National Congress MP, and chair for the portfolio committee on public enterprises, Sindiso Magaqa, said President Cyril Ramaphosa's recent engagements with state-owned entity chiefs showed government's commitment to unlocking their great potential as revenue generators..."
...
"...Deputy minister of public enterprises Phumulo Masualle said the airline secured leases for aircraft, reviewed contracts with vendors and taken other steps to fix itself and that it needed ample support on its journey to becoming "fit for purpose"..."


https://www.fin24.com/Companies/Industr ... d-20191126
So it's obvious that SAA will get a 137th bailout from the government. The only thing that is new, compared to the 136 previous interventions, is the urgency. The bank account is empty because almost no one booked them during their strike last week.

(edited: typo)
Last edited by Passenger on 30 Nov 2019, 11:01, edited 1 time in total.

rwandan-flyer
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Re: South African Airways: ongoing rumours about financial woes

Post by rwandan-flyer » 29 Nov 2019, 22:15

I m not feeling well when people say that, under the Apartheid, SAA was a better airline. Probably, but don't forget how was this governement. It's my opninion. Then after Apartheid, despite some restructuring plans , like in 2007, SAA often made profits, till early 2010s. Late 90s, 2000s, SAA was very active in Africa, unfortunately results were not good

SA Alliance Air was a "SAA subsidiary" in East Africa, with a base in Uganda. They acquired stakes into Air Rwanda, four years after the Genocide, and renamed the airline Alliance Express.

They have planned to built a strong hub at Dar Es Salaam, with Air Tanzania, called ""Golden Triangle", like Royal Air Maroc did with Air Senegal International, in 2000s, or Kenya Airways with Precisionair Tanzania, from 2003.

SAA was the biggest shareholder into the Air Cemac project (the new Air Afrique)

In 2005, it became the first non-Saudi airline to fly a direct Hadj service to Medina in Saudi Arabia.

SAA was the 1st African airline to join an airline alliance, in 2006

However some bad desicions were made, mainly due to political interference, since some years.

They have probably made some mistakes about the fleet and some people have looted the SAA. Happened same thing wih Kenya Airways

Johannesburg has a very bad geographical position. And the competition is very stiff, ex:

Emirates operates 4 flights a day to Johannesburg.
Qatar Airways operates 3 flights a day to Johannesburg
Ethiopian operates 3 flights a day.
Kenya Airways operates 3 flights a day to Johannesburg
Their biggest mistake was joining Star Alliance IMO since they have a much stronger bond with the UK than any other country. One World would have been ideal. Since they joined star alliance, they lost the war on the JNB-LHR route to BA and had to axe their CPT-LHR route. ( and shortly after, their CPT-FRA route ) the rise of the A3 in the middle east and Ethopian airways growing so fast didn't help either.
Oneworld was never interested by Africa, which was not the case of Star Alliance and SkyTeam. If it was the case, Brussels Airlines would likely to be in Oneworld, and not in Star. Oneworld has always focused on Asia, America and Europe. British Airways has closed many routes in Africa. If Royal Air Maroc will join Oneworld in 2020, it's probably because, Qatar Airways (which owns 12% of IAG) bought RAM stakes, in 2016. I don't kow, if Qatar Airways has the same project, with RwandAir: find an Oneworld partner, for the East & Southern Africa market

Matt
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Joined: 14 Nov 2018, 09:20

Re: South African Airways: ongoing rumours about financial woes

Post by Matt » 30 Nov 2019, 19:10

rwandan-flyer wrote:
29 Nov 2019, 22:15
I m not feeling well when people say that, under the Apartheid, SAA was a better airline.
I said they made more profit under the years of apartheid. Not that they where a better airline. Nuances.

Passenger
Posts: 6361
Joined: 06 Dec 2010, 20:54

Re: South African Airways: ongoing rumours about financial woes

Post by Passenger » 01 Dec 2019, 13:20

The November salaries have been paid in full.
Source:
https://www.jacarandafm.com/news/news/s ... ries-full/

Meanwhile, Solidariteit/Solidarity, a Christian-inspired trade union, has started a court case to put South African Airways into Business Rescue legislation (trade court supervision). It would the first time in SA that a SOE is put into Business Rescue.
Source:
https://solidariteit.co.za/en/sal-business-rescue/

Passenger
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Re: South African Airways: ongoing rumours about financial woes

Post by Passenger » 02 Dec 2019, 07:43

"...SAA, whose future hangs in the balance after a crippling strike, is determined to remain open for business, but will go through a "radical restructuring process" to survive, says the Department of Public Enterprises..."

https://www.businesslive.co.za/bd/natio ... g-process/

Passenger
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Joined: 06 Dec 2010, 20:54

Re: South African Airways: ongoing rumours about financial woes

Post by Passenger » 05 Dec 2019, 07:39

From news24.com / fin24.com:
5 Dec 2019 - South Africa's Minister of Public Enterprises Pravin Gordhan has issued a statement to confirm that South African Airways will be placed into business rescue immediately. This decision was taken by its board, and supported by government, said Gordhan. This follows the leaking of a letter on Wednesday evening from President Cyril Ramaphosa to Cabinet, stating that the national airline must enter voluntary business rescue. “This is the optimal mechanism to restore confidence in SAA and to safeguard the good assets of SAA and help to restructure and reposition the entity into one that is stronger, more sustainable and able to grow and attract an equity partner,” said Gordhan. He added that SAA’s reliance of government finances must be reduced as soon as possible. But government will give SAA an additional R2 billion "a fiscally neutral manner" to help keep the airline operational. It must be clear that this is not a bailout,” Gordhan added. "This is the provision of financial assistance in order to facilitate a radical restructure of the airline." In a separate statement on Thursday morning, SAA said its board had taken a "considered and unanimous conclusion" to place it into business rescue to create a "better return for the company’s creditors and shareholders".

Business rescue

Business rescue is aimed at “rehabilitating” a company that is in severe distress. A business rescue practitioner is appointed who has to run and restructure the business. Government won’t be able to intervene at all: all the power is with the practitioner. The aim is to put the company on a sustainable footing and save jobs, or if the company can’t be saved: ensure better returns for creditors. Importantly, during a business rescue, the company gets protection against legal claims by creditors. It will offer SAA a bit of a breather while the practitioner sorts out its business. The practitioner will also undertake “rationalisations” as are necessary, Gordhan said. This includes reorganising the state aviation assets in a way in which they are better positioned to be sustainable and attractive to an investment partner, he added. “This set of actions should provide confidence to customers of SAA to continue to use the airline because there will not be any unplanned stoppages of flights or cancellation of flights without proper notice should that be necessary.”
Source - more info (free access news site news24.com):
https://www.fin24.com/Companies/TravelA ... y-20191205

Passenger
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Re: Breaking news: South African Airways in "Business Rescue" as from 05 Dec 2019

Post by Passenger » 05 Dec 2019, 07:45

SA Tourism Update: "...a new provisional timetable will be published shortly...”

Passenger
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Joined: 06 Dec 2010, 20:54

Re: South African Airways in "Business Rescue" as from 05 Dec 2019

Post by Passenger » 07 Dec 2019, 17:42

Long to-do-list for Les Matuson, the appointed business rescue practitioner:
https://www.moneyweb.co.za/news/compani ... o-do-list/

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