SAA after Business rescue

[Darren]

It also notes that the Government is now pouring hard cash into SAA ……

It is worth noting that government pencilled in a commitment during the Medium Term Budget Policy process in October 2019 to repay SAA’s existing R9.2-billion in debt, and provide it with R2-billion in operating capital

That is 11.2 Billion Rand of taxpayers funds / cash - going into the airline

JK

That R9.2 billion is government-guaranteed debt, meaning that the state has no choice but to pay it if SAA cannot. See my post earlier in this thread.

The alternative is that the debt is defaulted on, triggering a cross default on other government debt. That'll cost taxpayers much, much more than R11.2 billion.

What do we know about Les Matuson. Has he got any airline experience?

None that I can see, but then I don't know of any BRPs with airline experience in SA. They'll likely bring on outside expertise as part of the process.

Strictly speaking that isn't quite true. R9.2 billion will go to creditors. R2 billion will go to airline. But yes the total is priced in via the Medium Term Budget and that's, effectively, what SAA is costing the taxpayer.

Yup.

The MTBS planned to repay it over three years, to cushion the blow a little. I wonder if the BRP now means that must be accelerated. Lots of interesting new questions and edge cases when an SOE with state-guaranteed debt goes into business rescue.

[HJK 414]

It also notes that the Government is now pouring hard cash into SAA ……

It is worth noting that government pencilled in a commitment during the Medium Term Budget Policy process in October 2019 to repay SAA’s existing R9.2-billion in debt, and provide it with R2-billion in operating capital

That is 11.2 Billion Rand of taxpayers funds / cash - going into the airline

JK

That R9.2 billion is government-guaranteed debt, meaning that the state has no choice but to pay it if SAA cannot. See my post earlier in this thread.

The alternative is that the debt is defaulted on, triggering a cross default on other government debt. That'll cost taxpayers much, much more than R11.2 billion.

Hi Darren,

It was actually meant as an addition to your earlier post (example of parents co-signing and not really forking out money etc etc) …..
As far as I know - this is the first time that the Government has to pay out a loan that SAA is defaulting on (previously only guarantees for loans).
Whether the funds go to the banks / a creditor or the airline is semantics in my view ……. bottom line is that the airline has lost the cash to the point that it is unable to meet it's requirement for repayment - so the Government have to make good on their guarantee …….at the end of the day - SAA have lost the cash and now taxpayers money is applied to settle the loan.

JK

[Darren]

Ah, ok. I see what you mean. Sorry for the misunderstanding.

Yes, as far as I'm aware this is the first time government has had to pay out on SOE debt that it has guaranteed.

[snoopy]

What do we know about Les Matuson. Has he got any airline experience?

He's qualified to do the BR job...looking at it from business point of view.

But he's not on his own in the process, the creditors including affected persons (or the body that represents them), are also in the process with him. He just makes the final call.

Its usually better to look at the mess objectively from outside - instead of with emotion from within. But he will obviously listen to what the rest who have votes on the future of SAA has to say.

[HAAN]

As SAA have now been placed in Business rescue, does any union still have the right for their say?
Its amazing how all the unions are all in us and arms about the appointed BR person etc except SAPA.
I suspect SAPA respect the process that SAA now have to undergo and will have to be happy of upcoming job-losses.

[snoopy]

Yes they do if they represent affected persons. But if they make stupid choices themselves - they may just CAUSE SAA's early liquidation. SAPA also didn't partake in the strike - they are using another approach to all of this.

The BRP has the final say. The BR plan hasnt been set up yet- so no point in speculating what that will entail. They haven't even seen the financials of the last 2 years yet. And the creditors are going to want to see that.

[HAAN]

Thank Snoopy. Yup the strike was probably the most useless excersize ever.

For those like me that dont understand the BR process and what it means....2 great videos.

[snoopy]

Basically the BRP must make the best informed decision he can together with the creditors - as to what they are going to do within the time frame permitted.

If the BRP determines after having had a good look at the situation - that SAA is not savable (cant pay its debt in the next 6 months) - then the BRP will instruct that the company be put in compulsory liquidation - this is a legal obligation - rather than going down a process that is fruitless.

Chapter 6 of SA Companies Act.

[ARM505]

Meanwhile, realistically, who would be buying tickets on SAA right now? How does BR affect day to day operations and basic trade? Will this be a purely high level impact for the moment, or in other words could current services be affected right now? (for example, fuelling services etc.)

Put another way, if a passenger bought a ticket for a flight tomorrow, how could they be affected, if at all?

[snoopy]

A passenger must basically ensure that the ticket or travel plan they take up with the airline or its agents, INCLUDES liquidation and business rescue travel insurance cover. Otherwise they could end up in a bad spot if their travel plan or ticket doesn't have that specific cover.

And I would ask for a printout of that specifically before flying overseas for example. The government guarantees to SAA mean squat for the ordinary traveler.

So make sure of that BEFORE you board to go overseas - read the fine print of your travel insurance covering your travel plan.

Make sure the insurance will cover your cost if the company liquidates while you are overseas. Because you will need to get back home some other way if things go belly up while you overseas.

It must be specified as a clause in the schedule of the insurer.

[dollar]

Ticket sale volumes, or the lack thereof will probably kill it off within weeks.

[Bearcat]

Rather sad depiction from Zapiro

[HAAN]

[apollo11]

Dreadfull situation, I flew with SAA in August this year to NY and I was really impressed, the service was terrific, flying just amazing, some convective activity had to be avoided and CAT turbulence, flight deck came up warning about the weather and I could see and feel gentle turns being made to avoid some weather, the landing both dept and return were amazingly smooth.

Small things like being offered extra water all the while coffee, the crew coming to a gentle stop at holding point and taking their feet off the brakes just before the aircraft stopped was brilliant, no forward jerk, the beautifully smooth power application for takeoff and TOD, I thought many times during the dept and ret flight darn these are excellent pilots, airmanship just top class.

I'm really angry and millions of other South Africans are at govt for being the wrecking ball here with a string of last decade interfering with incompetent management (the management versus employee ratio is staggeringly inefficient)and whilst there were major blunders like route cancellations, engaging a primary school teacher (Dudu Myeni) to run an airline surely had to be the stupidest tactic of them all. On her watch, significant and disastrous decisions were also made. She must answer with jail time as many others should too.

The unions too have played a significant role in their myopic actions.

A brilliant airline on its knees probably to be beheaded. And that is just one SOE, others too getting in line.

The added tragedy is the spin-off affect more than simply a few thousand employees but many other companies and business dependant on the airline, the "mini economy" the airline generates is amazing and will be felt by many more thousands of people involved directly and indirectly, locally and internationally.

[Caravan Driver]

Dreadfull situation, I flew with SAA in August this year to NY and I was really impressed, the service was terrific, flying just amazing, some convective activity had to be avoided and CAT turbulence, flight deck came up warning about the weather and I could see and feel gentle turns being made to avoid some weather, the landing both dept and return were amazingly smooth.

Small things like being offered extra water all the while coffee, the crew coming to a gentle stop at holding point and taking their feet off the brakes just before the aircraft stopped was brilliant, no forward jerk, the beautifully smooth power application for takeoff and TOD, I thought many times during the dept and ret flight darn these are excellent pilots, airmanship just top class.

I'm really angry and millions of other South Africans are at govt for being the wrecking ball here with a string of last decade interfering with incompetent management (the management versus employee ratio is staggeringly inefficient)and whilst there were major blunders like route cancellations, engaging a primary school teacher (Dudu Myeni) to run an airline surely had to be the stupidest tactic of them all. On her watch, significant and disastrous decisions were also made. She must answer with jail time as many others should too.

The unions too have played a significant role in their myopic actions.

A brilliant airline on its knees probably to be beheaded. And that is just one SOE, others too getting in line.

The added tragedy is the spin-off affect more than simply a few thousand employees but many other companies and business dependant on the airline, the "mini economy" the airline generates is amazing and will be felt by many more thousands of people involved directly and indirectly, locally and internationally.

I share your sentiments. The SAA product was/ is good and as a passenger I have always felt safe, comfortable and well catered for.

As an airline pilot, and I am sure I am speaking for a lot of other South African pilots, the saddest part of SAA’s demise is that it was the airline which I aimed to fly for one day when I accumulated the right experience. Sadly that dream is probably just gonna stay a dream of what once was.

I hope this business rescue can turns things around for the better even if it it means that SAA comes back as a trimmed down version. Growth from that base again as well hopefully.