Things have taken a turn for the worse at South African Airways (SAA), with the embattled entity now being placed into business rescue by minister of public enterprises Pravin Gordhan. The new status takes effect immediately, Gordhan confirmed in an official statement.

“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,” he explained last night.

The minister had stated plans to place SAA under racial restructuring at the weekend, which was then followed by a leaked letter from president Cyril Ramaphosa to his cabinet noting the desire to place the airline into business rescue earlier in the week.

Now that intention has officially been placed into effect, which in turn has placed an even larger cloud of doubt over the organisation.

As for what is in store for SAA moving forward, Gordhan laid out what the business rescue plan will entail:

  • Government, though National Treasury, providing an additional R2 billion of PCF in a fiscally neutral manner.
  • The prevention of a disorderly collapse of the airline, with a negative impact on passengers, suppliers and other partners in the aviation sector in SA.
  • It will provide an opportunity to critically review the cost structure of the airline, while simultaneously attempting to retain as many jobs as possible. This reality was clearly understood in the recent wage negotiation process between the unions and the company.
  • This approach also provides a structured opportunity to reorganise the state aviation assets in a way in which they are better positioned to be sustainable and attractive to an investment partner.

Gordhan was also careful to stress that business rescue does not mean another bailout for SAA.

“It must be clear that this is not a bailout. This is the provision of financial assistance in order to facilitate a radical restructure of the airline,” he said.

“A business rescue practitioner will be chosen to take charge of the business and perform the function of operating the airline with the assistance of management. The practitioner will also undertake such rationalizations as are necessary. This set of actions should provide confidence to customers of SAA to continue to use the airline because there will not be any unplanned stoppages of flights or cancellation of flights without proper notice should that be necessary,” he concluded.

In the interim what these means for passengers of SAA is anyone’s guess, but the airline has commented that it will endeavour to keep to its current schedule given recent events.

With things only set to ramp up over the next couple of weeks for festive season travelling, it’s unclear if SAA will effectively be able to maintain stability.

When he's not reviewing the latest smartphones, Robin-Leigh is writing about everything tech-related from IoT and smart cities, to 5G and cloud computing. He's also a keen photographer and dabbles in console games.