Practitioners on the South African Airways rescue team interested in maintaining the revival of the airlines have been given 25 days ultimatum to formulate a new business plan. The strict deadline comes after the Standing Committee on Public Accounts (SCOPA) deemed their draft rescue plan as unsatisfactory.
South Africa’s national carrier (SAA) joined the bankruptcy protection in December last year, after its five months business rescue efforts failed even after spending close to USD539 million along the course of struggling operations.
According to Flight Global, committee chairman, Mkhuleko Hlengwa expressed discomfort with the business proceedings thus far and appealed for “more interaction” between parties. A draft rescue plan submitted to the committee via an online meeting on May 5th was not up to standards.
Member of Parliament Bernice Swarts was also unhappy with the numerous extensions, and questioned the authenticity of the hired practitioners.
“They never had the intention of rescuing SAA at all. Because today when they give us their finances, (rescue practitioners) are not telling us how much they are paying themselves or how much they are paying the consultants,” noted the African National Congress MP
With doubts surrounding their competency, the rescue practitioners now have one final chance to keep SAA from bankruptcy. Further, SCOPA members will submit any questions they have to the practitioners and must receive responses by May 26th. Rescue practitioners will have until mid-June to come up with a formal business plan to rescue SAA.
The rescue practitioners, who have no form of aviation experience, started work on saving SAA back in December. Analysis and presentations began in January 2020, where the practitioners obtained a $2.7m loan from the South African government.
Initially, the practitioners had to propose a business plan by the week of March 16th. During this, the practitioners implemented various cash-management initiatives.
Amid flight suspensions and restructuring by the government, practitioners failed to provide a business rescue plan. By April 2020, the committee instead saw an increase in the expenditure by the rescue team, amounting to $500m. At that point, there was still no progress in a concrete plan to save the Airline.
The troubled airline has not made a profit since 2011 and to date received government bailouts amounting to $1.6bn.
The unprecedented virus outbreak has also done nothing to help the situation. In April it was revealed that about five thousand South African employees are in danger of losing their jobs amid struggles to weather the pandemic. Currently, however, South Africa’s Labour Court has halted the layoffs.
Furthermore, with no future government funding, South African Airways could be facing liquidation sometime soon. Plans seem to be underway to form a new airline in its place.
According to the Democratic Alliance, “The South African taxpayer does not deserve to be saddled with another state-funded airline when the evidence clearly shows that it will also be another fiscal drag just like its predecessor.”
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