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South African Airways Secures Life Support Infusion to Continue Operating

South African Airways is now in bankruptcy protection as it embarks on an arduous road to recovery

December 5, 2019

Embattled South African Airways is now on life support after a series of work stoppages and mismanagement issues forced the airline to seek “voluntary business rescue.”

The term refers to a practice similar to Chapter 11 Bankruptcy Reorganization that US businesses seek when faced with extreme financial challenges and avoid financial liquidation by creditors.

For South African Airways, that has meant a $272 million bailout from existing lenders and the country’s national treasury.

“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,” Public Enterprises Minister Pravin Gordhan said in a statement earlier today. The process will allow SAA to continue operating.

State-owned SAA has not made a profit since 2011 and relies on government support. It has reportedly lost some $2 billion over the past 13 years.

The airline’s former CEO, Vuyani Jarana, officially resigned in August, blaming lack of state funding and excessive bureaucracy for undermining his turnaround strategy.

In mid-November, two of the airline’s largest unions walked out on an eight-day strike over wages and job cuts that forced SAA to ground hundreds of flights.

Meanwhile, two major travel insurance companies in South Africa have stopped covering tickets issued by South African Airways (SAA) as doubts mount over the airline’s survival. Mango, an SAA subsidiary airline, will continue to operate as usual and as scheduled.

“This is a well-defined process that will allow SAA to continue operating in an orderly and safe manner and to keep planes and passengers flying under the direction of a business rescue partner,” Gordhan said in the statement.