Thursday, August 16, 2018
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South African Airways says it needs capital injection “now”

South African Airways

South African Airways needs a new capital injection “now” to stay afloat and is in discussions with banks and the National Treasury for “an open credit line”, its chief executive said on Tuesday.

State-owned SAA, which has not generated a profit since 2011, is regularly cited by ratings agencies as a drain on the government purse and has already received state guarantees totaling nearly 20 billion rand ($1.6 billion).

“We do need access to capital to sustain the operations and we are having discussions with Treasury, as well as the banks around how we have an open credit line,” Chief Executive Vuyani Jarana told parliament.

Asked by an opposition lawmaker when the airline would need to access billions of rands of extra state support, Jarana responded “Now”.

He later told reporters that South African Airways would need around 5 billion rand this year to pay down debts and for operational costs. The struggling airline has not had credit facilities since August when bank lenders pulled the plug after a debt repayment scare.

“Over the next six months we will need… in the range of 5 billion rand to make sure we can support the working capital,” Jarana said, adding that amount included arrear payments.

The National Treasury said that South African Airways needs an equity partner to pump money into the company to address a liquidity crisis and to help with the implementation of a turnaround plan.

The company’s results for the year to March 31, 2017 – which had been delayed after the company received a 10 billion rand government bailout last year – showed a deepening loss of 5.6 billion rand, a more than threefold increase from the previous year’s 1.5 billion rand loss.

South African Airways will need to repay bank debts of 9.2 billion rand by March 2019, Jarana said, adding that this figure could increase.

South African Airways has not been able to pay the principal amount, we’ve always been able to service the interest payments on this, so part of the strategic options we are looking at… is an optimal capital structure,” he told reporters.reuters reports

The costs to South Africa of maintaining the ownership of a national airline are proving to be unbearably expensive.

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