Aviation: South African Airways secures R3.5 billion lifeline from development bank

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Again, haemorrhaging South African Airways(SAA), has secured R3.5 billion in loan funding from the Development Bank of Southern Africa.

According to capetalk.co.za, the airline had initially sought R4 billion to fund the rescue while it was being restructured, but it is believed that amount has since grown to R5.5 billion.

The first R2 billion was provided through a loan from a consortium of commercial banks.

The billions are needed to run the airline during the business rescue process.

Also, atqnews.com, reported that SAA had earlier held talks with the South African government as well as private financial institutions over the opening up of desperately needed lines of credit.

The state-owned carrier has not been profitable since 2011 and has, therefore, had to rely on over ZAR20 billion rand (USD1.6 billion) worth of state-backed guarantees for its survival.

Former Airline Chief Executive Vuyani Jarana told Parliament that SAA had debts of ZAR9.2 billion, as well as liabilities amounting to ZAR17.8 billion and, therefore, was unable to pay the principal debt and, as such, was only paying the interest.

Given that its financial obligations exceeded its income, said to amount to ZAR30.7 billion, Jarana said SAA could only carry a certain amount of debt.

The airline’s weak balance sheet has meant that it cannot attract investment or loans and, therefore, has to rely on bailouts. As such, a promised ZAR10 billion bailout was paid to the airline in December 2018, with ZAR7.6 billion having gone to lenders while ZAR2.4 billion had been used for working capital requirements.

The airline recently put up for sale nine of its Airbus aircraft, according to a tender document seeking proposals from interested buyers that was seen by Reuters.

SAA, which was placed in a form of bankruptcy protection late last year, is selling the Airbus A340-300s and A340-600s as well as 15 spare engines, the document said.

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