South African Airways conceals financial information in the fear of liquidation
SAA is reluctant to release its financial information due to the fear of liquidation.
February 24, 2020: Within two months, South African Airways (SAA) has become the talking point in the African aviation sector. Now, the struggling carrier is reluctant to release its financial information due to the fear of liquidation. The last time that the SAA presented financial statements was for the financial year of 2016-2017. Minister of public enterprises Pravin Gordhan stated this at parliament recently, as reported by Business Tech.
The airline which began to sink into debt since 2018, started to show signs of bankruptcy from December 5, when it slipped into the business rescue process. The carrier received 4 billion rand ($274 million) in funding to allow it to continue operating. By the end of February 2020, the business rescue practitioners (BRPs) overseeing SAA were expected to present their turnaround plan for the carrier.
Parliament reacted by saying it understands that the premature release of financial statements has consequences but needs to understand how the airways came to be in such a state.
In November 2019, two of the insurers blacklisted SAA as doubts grew over its survival. By January 2020, SAA received 3.5 billion rand ($239 million) from the state-owned Development Bank of Southern Africa (DBSA) to prevent its collapse. February did give nightmares to the airline when South African president Cyril Ramaphosa appointed special government investigators to probe the airline. In the same month, adding more fuel to the fire entered South Africa's Airlink which plans to sue the carrier and its BRPs for ZAR700 million rand ($47 million) in unpaid ticket revenue.
Presenting in parliament this week, Gordhan said that the government was in %u2018unknown territory' after the airline became the first state-owned enterprise to be placed under business rescue.
In response, parliament said that it understands the consequences related to premature exposure of the annual financial statements, but stressed that it was important to understand what had led to SAA's current financial woes.
The committee said that it will set a date after March 6, 2020 - the end of the three months' period that the business rescue practitioners require for establishing the plan and presenting it to the creditors - to request the business rescue practitioners to appear and answer to all the issues that are outstanding where SAA is concerned.
The ANC has said that it will step in and intervene in SAA's business rescue if it believes that the business rescue practitioners are making decisions that go against its goals for the airline. ANC treasurer-general Paul Mashatile said that, as the main shareholder, the government has the right to protect its assets.
The airline edging towards a total collapse decided to sell five A340-300s and four A340-600s aircraft, 15 spare engines - including CFM International CFM56s and Rolls-Royce Trent 500s, and four auxiliary power units (APUs), as per the tender notice published on SAA's website in January 2020. The sale of the aircraft is part of a process to shore up the balance sheet, but more importantly, to offload planes that were becoming old and expensive to run.
In February 2019, South Africa's Competition Commission (SCA) made a R1.1 billion, inclusive of interest, award in favour of Comair against SAA. In terms of the court-ordered settlement, SAA was to begin payments from 28 February 2019 to 28 July 2022.