A bailout sum of US$1.2bn [R21bn] has been proposed to the South African government by the administrators running embattled national airline to help repay debt and resume operations after the lifting of COVID-19 travel bans.
The plan includes about R17bn that will go toward repaying creditors of South African Airways [SAA], according to a draft copy seen by Bloomberg. As much as R2bn will be used for retrenchments and a further R2bn 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, 2020, to finalise 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. 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 finalised, 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, starting 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.
Meanwhile, the African Airlines Association [AFRAA], has released a new analysis of the impact of COVID- 19 on the airline industry in Africa which reveals an estimated revenue loss of USD 8.103 billion for African airlines for the year 2020.
The impact assessment analysis further shows a 90.3 percent year on year passenger traffic reduction for the month of May; recovery is expected to start from Q3 2020 with domestic flights, followed by regional and intercontinental flights.
On cargo operations, there is currently a shortage of cargo capacity in Africa due to the need for the carriage of medical equipment and essential goods. In the wake of this lack of capacity and rising prices, AFRAA is assisting its members to adapt in a bid to keep supply chains operational.
The evolution of the number of COVID-19 cases indicates that the most impacted countries in Africa are South Africa, Egypt, Morocco, Algeria, and Ghana each with a total of more than 5,000 cases of infection.
While the rate of infections in other continents is beginning to ease off, in Africa the rate of infections is still on the rise. However, the recovery rate in Africa is higher, with an average death rate of 9 percent compared to the global rate of 19 percent.
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