Trade News

Another Blow To Ailing SAA

Johannesburg, 17 February 2019 – Adding to the cash crisis at South Africa’s national carrier, a court settlement agreed to between South African Airways and Comair will see SAA paying Comair R 1,1 billion in damages plus legal costs.

What this means is that it adds at least another R 1,2 billion to the taxpayer bailouts required to keep SAA in business.

Comair, the operator of and British Airways in South Africa, advised shareholders on Friday that it has entered into a full and final settlement agreement with SAA regarding a case relating to SAA’s incentive schemes for travel agents from 14 years ago.

According to Comair, the scheme was designed to keep travel agents loyal to SAA, therefore, allegedly being in breach of the Competition Act. The scheme was in place from 2001 to about 2006. The Supreme Court of Appeal has now made the settlement agreement between the two airline companies an order of court.

In order to be able to continue trading and flying its aircraft until the end of March 2019, SAA has recently had to borrow another R 3,5 billion on top of the R 14,0 billion that SAA already owes and of which it is understood that some R 9,0 billion plus the recently borrowed R 3,5 billion, amounting to R 12,5 billion, are repayable by the end of March 2019.

‘These massive borrowings remain an Albatross around the necks of taxpayers despite taxpayer cash bailouts of R 15,0 billion paid to SAA over the past two years,” says Alf Lees MP – the Democratic Alliance (DA) Shadow Deputy Minister of Finance.

The SAA corporate plan reflects continued losses of R 7,1 billion for the 2018/19 and 2019/20 years. The DA view is that these projected losses are optimistically low and that unless these losses are funded by further taxpayer bailouts the airline will be forced into liquidation.

“In the first place, there is no logical reason for SAA to be in business at all. The national carrier is still clearly cursed by maladministration and corruption, is over-staffed and bankrupt. In the second place South Africa, and thus South African taxpayers, is facing a massive cash crunch largely because of the failing ANC created ESKOM crisis but also because of the ANC created crises throughout the government.

“Finally, there are private airlines that have no drain on taxpayers’ funds that are ready and able to immediately fill any gaps that may arise if SAA were to be shut down. South Africa is itself so heavily in debt that it simply does not have the money to continue bailouts of SOE’s such as South African Airways,” says Lees.

In order to at least save some of the jobs at South African Airways as well as to minimize the taxpayer bailouts, the DA has urged Finance Minister Tito Mboweni to make the hard decision to place South African Airways under business rescue.

“Sadly, with business rescue, taxpayers will likely have no option but to meet the government guarantee obligations very foolishly made by the ANC government on behalf of SAA,” Lees concludes.

Read more on this topic: The Cost Of SAA Bailouts To Taxpayers.

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