Business

South African Airways receives a further contribution from the government

Photo: South African Airways

Last Wednesday (October 27th), South African Airways announced that it had received a further financial contribution to aid the South African government. This contribution was $ 640 million. These amounts add to the R 16.4 billion ($ 1 billion) the company has received since February.

All of these amounts are government contributions designed to help the state-owned company balance its cash and write off amounts of debt. It is planned to begin the full restructuring of SAA, which will require the company to reduce its mesh size and fleet size to adapt to the new reality.

A blunt plan will result in the SAA reducing 44 aircraft to just 6 and maintaining only 20% of its current staff. The return of several aircraft has already started, 33 aircraft have been returned to their lessors, leaving the SAA with 3 A319s, 1 A330s and 8 A340s.

As part of the restructuring plan, it is planned to increase the number of aircraft to 36 by the end of 2021. In addition, around 1,000 new employees who were laid off this year are expected to be hired.

Covid-19 wasn’t the main reason behind the SAA crisis. Before the pandemic spread around the world, the company had suffered continuous losses for 10 years. Under those years, there is an indictment by an organization called The Organization Undoing Tax Abuse (OUTA) indicating that there was a boycott of the SAA’s administration.

OUTA cites SAA as a “vanity project” and that managers “steal from the poor”. In a statement on the FlightGlobal website, the organization says the company’s rescue plan cannot be carried out.

“We are extremely concerned about the grant … to implement what we believe to be an impractical corporate bailout plan at SAA,” said Wayne Duvenage, chief executive. “We understand that debts have to be paid, but we cannot see more valuable tax revenues being wasted resuscitating a dying business,” added the executive.

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