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New airline based on the old one

Is there still a future for South African Airways?

South African Airways could still have a future - as a smaller airline. A proposal by the special administrators shows the path to the future.

In mid-April, South Africa abandoned its national airline. The government stated it would not help South African Airways with further cash injections or guarantees, Pravin Gordhan, minister of state enterprises then said. At the beginning of May, it was said that a new, smaller national airline would take over from the traditional carrier.

However, the new airline will apparently be built on the base of the current one. For Gordhan rejected a quick liquidation. He demanded that the special administrators of the insolvent South African Airways immediately come up with a plan for the national airline.

New holding company

South African media have received a draft. The plan proposes that SAA will not only receive the 16.4 billion rand (848 million euros) already earmarked to settle its debts, but another 4.6 billion. Of this amount, 600 million rand is earmarked for additional creditors, 2 billion rand for the restart of the airline after the Corona crisis and another 2 billion for the reduction of the airline by about half of the 5000 jobs.

The plan is to create a new holding company to launch a smaller airline. It will also unite the MRO and catering subsidiaries of South African Airways and the low-cost airline subsidiary Mango under its roof. The special administrators confirmed the existence of the plan, but stressed that it was only a draft.

Where will the money come from?

The special administrators explain in the draft that they had two potential investors in mind before the Corona crisis began. There had been talks about a partnership with a third company. However, due to the pandemic, all negotiations are on hold.

Alfred Lees, a member of parliament for South Africa’s largest opposition party, the Democratic Alliance, criticizes: «This money has to come from somewhere: probably from the taxpayers again.» He sees little added-value to the plan other than the creation of a new holding company.

There are still many approvals missing

The Ministry of state enterprises stated that the plan would be examined. Besides the government, the unions and creditors still have to agree.

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