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The government will pay the R3.5 billion that was previously agreed to finalise SAA’s business rescue process. Also, the government might subsidise certain unprofitable routes, if it deems the routes to be important enough to service. The opposition considers this as an ambivalent stand and feels that the government funding would be flowing towards the beleaguered airlines despite privatization
The South African government has now signed the agreement to sell a controlling shareholding in loss-making South African Airways (SAA) to the Takatso Consortium. Public Enterprises Minister Pravin Gordhan confirmed this during an address to the Standing Committee on Public Accounts (Scopa).
The government will pay the R3.5 billion that was previously agreed to finalise SAA’s business rescue process. Also, the government might subsidise certain unprofitable routes, if it deems the routes to be important enough to service. The opposition considers this as an ambivalent stand and feels that the government funding would be flowing towards the beleaguered airlines despite privatization.
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A formal presentation was made to parliament by the Department of Public Enterprises and SAA management of the plans. The opposition is making a demand that no more financial aid would be extended to SAA in the future in its new guise as a joint venture between the government and the private sector.
SAA had a difficult financial trajectory. At the end of 2019, insurance companies refused to extend insurance on tickets for passengers who booked tickets with SAA. Importantly, this insurance covers passengers against an airline going bankrupt after they paid thousands for tickets. Travel agents stopped selling SAA tickets as they feared that paying customers would arrive at the airport, but SAA airplanes would not. Flight Centre, one of the biggest travel agents in the country, was among those that suspended the sale of SAA tickets.
At the same time, banks refused further loans to SAA as the government was not willing to extend new loan guarantees. The International Air Transport Association (IATA) also asked for guarantees that SAA would be able to pay landing fees, berthing costs, and service fees when its planes land at international airports.
