The business rescue plan for SAA, which was published on Tuesday night, envisages a restructured airline that will begin flying in the near future due to a new bailout from the government.
It is envisaged that the new company will employ 1,000 of the existing staff with the remainder retrenched.
All in all, the plan will cost the government at least R26bn. Most of this — R16.4bn — is repayment of funders. Other costs, working capital, retrenchment costs and other debts amount to about another R10bn.
The government has committed to “fund or raise funding” of R2.8bn for working capital to restart operations, which will be done through appropriations from the Treasury, according to the plan.
It will also repay all pre-existing debt and fund the retrenchment costs.
Creditors will vote on the plan by next week. The fact that the largest creditors with the strongest voting power will be paid in full means that the plan is likely to be accepted. However, smaller creditors will receive only 7.5c in the rand.
The plan has large financial implications for the fiscus, which is under enormous pressure due to the Covid-19 crisis, higher borrowing and lower revenue. Economists are expecting the budget deficit for 2020/2021 to be about double the government’s projections of 6.8% set out in February.
In addition to the working capital for SAA, employee retrenchment costs are expected to be R2.2bn.
Since 2003, SAA has received R31.2bn in cash bailouts from the Treasury, bringing its cost to the taxpayer to more than R50bn over 20 years.
On June 24, finance minister Tito Mboweni will table an adjusted budget for 2020/2021.
SAA and officials from the department of public enterprises will be hoping for a confirmation of the bailout on which the plan rests.
The plan says that by January 2021, SAA is expected to operate a full domestic schedule, with regional and international flights after, depending on demand.
Creditors — excluding lenders and lessors — will receive 7.5c in the rand over three years, an improvement on the 0c in the rand that the business rescue practitioners say would have been realised by liquidation. This means that smaller creditors such as Comair and Airlink, which are owed about R700m and R500m respectively, will see very little of what they are owed.
While SAA has about 5,000 employees in the airline company, the subsidiaries employ about another 5,000 people.
Aircraft lessors will receive R1.7bn — equivalent to six months’ rental — to be paid over three years.
The plan gives scant detail of how the airline will be run, other than to say it would not be dependent on the fiscus and that the objective of the restructuring would be that the company continued on a solvent basis.
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