South African Airways Enters Into "Business Rescue"

This is a bailout. The airline is getting loans guaranteed by the South African government. There is a very high chance those loans will be repaid by the South African government since SAA has no path to profitable operations. So basically it's just the government giving them 270 million dollars.

As a South African and a tax payer we are fed-up with the government bailing out SAA. We have millions of unemployed citizens who live in shacks. All the money that went to SAA over the years could have made a big difference to those people’s lifes. A national airline is a luxury we cannot afford. I believe the tide has turned against SAA continuing as it is. Our minister of finance made it very clear that he wants SAA to shut down. The government made it clear there is no more money for bailouts. I believe business rescue is the right step, let’s see if the airline can realistically be turned around. If it becomes clear that it is not possible I believe it will be liquidated and shut down. It will be a pity for the staff as SAA has good people working for them but it is what it is and these things happen everywhere, look how many airlines went bang this year. If it happens there are many airlines that can pick up the slack, SAA does not have a huge market share and their international network is tiny. If there is something to be rescued and they can carry on I will support them. But for now big decisions have to be made. Interesting times.

I know I’m a random commenter but I’ve heard from people high up at Ethiopian airlines and SAA that Ethiopian is planning on taking a sizable stake in SAA with an option to take majority control in 3-5 years when at which point SAA will be folded into ET. The government of SA is embarrassed and will try and portray this as a win. Stay tuned.

Most discussions round SAA tend to have a lot of "just let them go bust" comments, but the whole issue is a very serious one for the SA government.

There is very little depth to the South African aviation market - SAA (including it's LCC Mango) comprise about half the entire market. There are many routes which are only served by SAA.

Comair (including Kulula) is about 6m passengers per year, Safair is about 3m, Airlink is about 2m - and that is about it. SA express (which looks like SAA but is separately government owned and also loss making) is about 1.5m

Compare those figures to SAA which is about 10m (7m SAA & 3m Mango) and there is no way that SAA can go down (and be grounded) and other airlines can simply take up the slack.

The UK government can let Thomas Cook go under (almost as large as SAA) and it barely creates a ripple in the UK aviation market - but for SAA to go down rips a huge hole in the SA aviation market which will take a long time to fill.

There basically trying to fix the problem with the mindset which caused the problem. Why don't they spend some money on a leader who hasn't been plagued by the airline's misfortunes and who can focus on turning it around. It may not be easy, but that's why I think an outsider is needed to fix it, and someone who won't give up unless necessary.

Flying SAA from LVI to MQP in April for safari. How worried should I be? Should I make alternative travel arrangements?

Look, Ben, I appreciate you're not a professional journalist, nor a South African so not familiar with our laws. South Africa was very strong foundations to set out good corporate governance and very modern company law. Business rescue is not just a bailout it is a legal step and status which is not a liquidation but a severe step that takes all control away from government and SAA management. The business rescue practitioner (who has now been appointed in the afternoon here in SA) has full and outright control, is independent and not employed by or coming from government or any political party. Under business rescue there are strict rules around what can happen and ultimately a court must approve the business rescue plan. The practitioner will likely made radical cuts to staff and assets and whatever comes out will NOT be the SAA of the past. Either it will be a leaner and profitable airline or it'll be a sale of assets with the result of no airline remaining at all.

This is a massive and extremely positive step to end the drain this airline has been on the fiscus and the only alternative would've been liquidation and chaos with no prospect of preserving the viable assets and operations of the airline.

FWIW, a lot of this was detailed in South African media coverage that has been online since at least 8hrs prior to your posts but I see you just copy pasted the press release. The board adopted this resolution following an order by the president, this was not a decision taken by SAA management. The bailouts are over, the R4bn are bridging to allow the maximum effectiveness of business rescue. I'd appreciate if you could do some more reading and update your post accordingly because what you've shared above is uninformed and unhelpful.

What I am most intriguied about is if SAA goes under will IAG take advantage of this opportunity to grow into the #1 spot in the SA market?

They have a strong brand down there through BA and Comair/Kulula.

IAG has nothing to do with Comair and Kulula other than that Comair licensed the franchise from them and a very small minority stake

Sure sounds like the equivalent of US Chapter 11 plus assigning a master to workout the next steps with post petition financing (which would take priority over all other creditors). Creditors with loans backed by assets (like planes) wouldn't have their status changed but, if like in the US, the master (or in this case also the government) could prohibit a creditor from reclaiming assets, even if they are security for a loan, since to do so would adversely impact other stakeholders.

Again, I don't know how the law in South Africa works but it seems this is comparable to US bankruptcy processing. If so this could either end up with SAA coming out of it, as likely a smaller company and shedding expenses (think pensions, leases, etc like US airlines did via bankruptcy), packaging the airline for sale to someone else or liquidation. Obviously the wild card is the government involvement.

I sure as hell wouldn't be buying tickets on them if I could avoid it. I gladly bought tickets and flew through Delta's, American's an USAirway's bankruptcies but I trusted US law and also that they were using it to shed cost, not to go out of business. I wouldn't be as comfortable that is the case with a foreign carrier.

Let’s just hope they last long enough to launch The A350 on the NYC route and then stay afloat til my flight in March :). Oh, and that they decide to invest huge amounts in their business class product to turn things around

@Mjolnir22 - LVI - MQP is definitely not an SAA route, it is most likely operated by SA Airlink. Which is a privately owned and profitable airline.

@Michael - thanks for your informative post, I agree that Ben’s post was not well researched and sent a message that was simply not accurate. Business rescue is a major step in the right direction, let’s see what comes out of it.

This sound likes Alitalia, lol

Not much point in getting the company on its feet again if they continue appoint incompetent people to run SAA. That is the long and the short of it. If the company is to survive the unions will have to be ignored. Either way radical changes will be taking place