SAA BRPs only have one option – Ghaleb Cachalia

DA MP says any business rescue proceedings should be stopped and carrier should be placed into liquidation

SAA business rescue practitioners only have one option – liquidation

25 April 2020

While the global airline industry is on life support, South African Airways’ (SAA) Business Rescue Practitioners (BRPs) have issued a statement to all affected persons stating that the prospects of further government bailouts has dimmed to zero.

The BRPs are now calling for either a process involving employees to develop a business rescue plan or in the absence of such agreement with employees, an urgent application for a court order discontinuing the BRP proceedings and placing SAA into liquidation.

It is unclear what employees may have to offer apart from their continued, and mostly hitherto valuable services, which SAA can no longer pay for – by the BRPs own admission – beyond 30 April 2020.  Moreover, any ”creative solution” as called for by the Inter-Ministerial Committee, would require – as previously stated by the Democratic Alliance (DA) – new partnerships, privatisation measures involving the airline and its subsidiaries, and regulations changed to allow foreign ownership to be in excess of the current capped level of 25%.

Whether this is possible under current Covid-19 circumstances affecting the industry is anyone’s guess. Virgin has fired more than 3 000 people including 600 Pilots, Finnair has returned 12 planes and laid off 2 400 people. Low-cost operators like You and Ryan Air have grounded 22 planes and fired 4 100 people, and grounded 113 planes and fired 900 pilots respectively.

The pattern is repeated through Etihad and Emirates and all other European carriers. It is forecast that a minimum of 8 000 planes will be grounded by September – with an average of 5.8 crews per plane (medium and long haul combined), that would make more than 90000 unemployed pilots worldwide. Many of these came from hitherto profitable airlines.

Now that taxpayers' funds are not rolling in to prop up the failed airline, SAA’s BRPs appear to have finally seized the urgency of the matter. They were previously happy to proceed despite being required by Section 132 (3) of the Companies Act, in the event of business rescue proceedings not having ended within three months after the start, to prepare a monthly report on the progress of the business rescue proceedings and submit such reports to the Court or the Companies and Intellectual Property Commission (CIPC). None were forthcoming. As a result of such inaction and dithering (whether imposed by government or not is unclear), the R5.5 billion previously advanced by government was fully drawn down and spent in one month. Now the taps have run dry.

It is now abundantly clear that SAA cannot be saved under the current circumstances affecting the aviation industry and in its utterly bankrupt form.

The pain of liquidation appears inevitable and government had better address its obligations with respect to employees and other costs associated with a prospective liquidation.

The DA looks forward to the scheduled consultation with committees on Tuesday 28 April where we will pose pertinent questions, that must be answered satisfactorily if there is any slim hope of staving off the only practical, if painful, alternative under the circumstances – liquidation.

Issued by Ghaleb Cachalia, DA Shadow Minister of Public Enterprises, 25 April 2020