June 24, 2020 / 9:39 AM / 2 months ago

South African government urges creditors to back SAA rescue plan

JOHANNESBURG (Reuters) - South Africa’s public enterprises ministry on Wednesday urged creditors to back a rescue plan for cash-strapped South African Airways (SAA).

Passengers board a South African Airways plane at the Port Elizabeth International Airport in the Eastern Cape province, South Africa, September 30, 2018. REUTERS/Siphiwe Sibeko/File Photo

Creditors are due to vote on the restructuring plan on Thursday, but one of the creditors - private airline Airlink - is in court on Wednesday trying to prevent the vote from happening.

The plan was published by the state-owned SAA’s administrators last week after repeated delays and months of wrangling.

The government has been applying pressure on the administrators to salvage SAA in some form even though it has not made a profit since 2011 and has relied on bailouts.

The Department of Public Enterprises (DPE) said in a statement: “DPE believes the ​approval of the business rescue plan ​would help creditors and employees to be co-creators of a new airline.”

The rescue plan proposed the government find at least 10 billion rand ($577.6 million) in new funds to restructure SAA, pay off some creditors and fund layoff costs. It also envisages scaling back the airline’s fleet while keeping most of its domestic and international routes.

Trade unions have voiced their opposition to the plan because of the thousands of job cuts it entails.

It is not yet clear where funding for a restructured SAA would come from. The DPE said on Tuesday it had received unsolicited proposals from private sector funders, private equity investors and potential partners.

Finance Minister Tito Mboweni is scheduled to deliver an emergency coronavirus budget later on Wednesday and could announce more government funding for SAA.

($1 = 17.3127 rand)

Reporting by Alexander Winning; editing by Olivia Kumwenda-Mtambo and Barbara Lewis

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