The Business Rescue Practitioners (BRP)s at state-owned South African Airways (SA, Johannesburg O.R. Tambo) published a long-awaited business rescue plan for the ailing carrier late on June 16, under which the government would have to raise at least ZAR10.3 billion rand (USD599 million) for it to work.

The government, which wants to retain SAA as a national asset, said it would assess the plan. The BRPs, who took the carrier over in December when it entered a local form of bankruptcy protection, said they need a commitment on funding by July 15.

The restructuring envisages a working capital injection of around ZAR2.8 billion (USD163 million), ZAR3 billion (USD175 million) to compensate for unused fares, ZAR2.2 billion (USD128 million) to fund layoffs, ZAR1.7 billion (USD99 million) to cover leasing payments, and ZAR600 million (USD35 million) for concurrent creditors.

Most of these payments would be made over a period of three years, according to the plan. Post-commencement finance (PCF) creditors would be paid first, from the working capital injection.

One of the annexes to the 106-page business rescue plan lists over 1,000 creditors, most of whose claims have not yet been verified.

The government said via a statement issued by the Public Enterprises Ministry on June 17 that it supported the rescue process and “has made it clear that the desired outcome should be to establish a viable, sustainable national carrier that must emerge from the business rescue process.” Creditors will also have to vote on the proposed plan, which requires 75% approval of the voting interest present.

The recommended funding is on top of ZAR16.4 billion (USD955 million) the government has already earmarked to repay SAA’s guaranteed debts, as well as the cost of supporting the airline until it becomes profitable, Reuters reported.

A projected balance sheet for the next three years listed in another of the plan's seven annexes shows SAA making losses of more than ZAR6 billion (USD349 million) during the period.

Fleet and staff numbers would initially be cut back to just six aircraft, all of them narrowbodies, between July 2020 and February 2021, and 1,000 employees, compared with 44 aircraft and around 5,000 employees before it entered the administration process.

This would rise to 19 narrowbody aircraft for the following nine months, then bring in seven A350-900 widebodies from December 2021 to make a total fleet of 26. By then, staff numbers would rise to 2,900.

According to the ch-aviation fleets advanced module, SAA operates 36 aircraft, 29 of which are leased, including six A319-100s, ten A320-200s, one A330-200, five A330-300s, six A340-300s, four A340-600s, and four A350-900s. On June 12, however, the business rescue practitioners said that all of the A340s and three of the A319s had been returned to lessors.

Despite the cutbacks, almost all of South African Airways' domestic and African destinations would remain intact, along with five of its nine intercontinental destinations. East London, Abidjan, Guangzhou, Hong Kong Int'l, Munich, and Sao Paulo Congonhas would be cancelled.

"It still shows them barely breaking even in the medium term, even with a substantially reduced headcount and further bailouts, and it is not clear at this stage if there is any commitment from National Treasury on funding this, which could leave it dead in the water. We'll have to watch next week's emergency budget closely," economist Peter Attard Montalto told Fin24 news, referring to a supplementary budget dealing with the impact of the Covid-19 pandemic, pencilled in for presentation on June 24.

BRPs Les Matuson and Siviwe Dongwana and their advisors have been trying to find strategic equity partners for the flag carrier, without success. They had been due to publish their rescue plan at the end of February but were given repeated extensions.