South African Express (EXY, Johannesburg O.R. Tambo) has secured a ZAR1.1 billion (USD98 million) guarantee from its sole shareholder, the South African government, to help solidify its finances ahead of the implementation of a cost-cutting programme.
The announcement comes after CEO Inati Ntshanga told a parliamentary fact-finding mission in November that the insolvent airline had failed to secure funding through commercial bank loans as it could not supply the requisite shareholder agreement. This resulted in SA Express approaching government to help address funding constraints.
As such, the airline's South Africa's Business Day newspaper says the loan includes ZAR567 million (USD48.9 million) to be used to solve its going-concern problems while the remaining ZAR539 million (USD46.4 million) is part of an existing 2013 guarantee needed to cover the terms of various debt covenants.
As with the ZAR6.488 billion (USD568.6 million) guarantee extended to sister carrier, South African Airways (SA, Johannesburg O.R. Tambo), earlier this year, Pretoria has attached several conditions to the guarantee which include the submission of a "fully documented" funding plan with clear timelines for required approvals within 30 days. Thereafter, Treasury is to receive regular progress reports on the implementation of cost cutting measures while identifying which managers are responsible for each respective parameter. Management are also to sign performance-linked remuneration contracts.
Last week, Ntshanga said the airline had already embarked on its restructuring programme with a view to returning to profitability within 18 months. Measures taken so far reportedly include capacity-rightsizing and renegotiating technical contracts with suppliers such as Lufthansa (LH, Frankfurt International). In March 2014, the airline also withdrew a USD820million Request For Proposals (RFP) for thirty narrow body aircraft ostensibly due to a lack of funding.
