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South African Airways (SAA) has entered into business rescue measures, a form of bankruptcy protection, after the government and lenders agreed a loan to keep the airline in operation.
The carrier’s board of directors agreed to go into business rescue following consultations with South Africa’s Department of Public Enterprises, which has offered a 2 billion rand loan in addition to 2 billion rand being provided by existing lenders.
As part of the measures, SAA will undergo restructuring in an effort to turn around its financial situation.
In a statement, the airline said: “SAA understands that this decision presents many challenges and uncertainties for its staff. The company will engage in targeted communication and support for all employee groups at this difficult time.”
SAA was severely impacted by strike action last month that saw services suspended. It agreed a pay rise of nearly 6 per cent to draw a close to the dispute.
The airline plans to “operate a new provisional timetable and will publish details shortly”.
Minister PJ Gordhan from the Department of Public Enterprises said: “Business rescue 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 practitioner.
“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.
“This initiative demonstrates that government will undertake the necessary bold steps in order to reposition its assets in such a way that they do not continue to depend on the fiscus and thereby burden taxpayers.”
Les Matuson from Matuson Associates has been appointed as business rescue practitioner to lead the process.
The move does not affect SAA’s subsidiary Mango.