Government’s decision to put more taxpayers’ money into SAA is “outrageous” and amounts to “subsidised competition” in the airline industry, say opposition politicians and travel industry players.
The Department of Public Enterprises said earlier this month that government would “reprioritise funds” to finalise the restructuring of SAA.
The announcement follows a last-minute commitment made to SAA’s business rescue practitioners on the day the BRPs met with SAA’s creditors and averted a situation where the parties would have to decide between liquidating SAA or winding down the company in line with Section 128 1B2 of the Companies Act.
The BRPs told creditors on September 18 that they expected to be in a position to provide affected parties a clearer indication of the timeline and details of how funds would flow into the company by the end of the following week (September 25) but have yet to do so.
Louise Brugman, spokesperson for the BRPs, said they would be updating affected parties soon.
Democratic Alliance member of the Standing Committee on Public Accounts, Alf Lees, told Tourism Update that this would require other budgets to be cut, which would likely mean less money spent on nurses, policemen, teachers and other front-line services. “This is completely outrageous,” he said.
“Despite the assurances given to the creditors of SAA, Public Enterprises Minister Pravin Gordhan has now clearly run out of options and they are reverting to taking another taxpayer bail-out in order to fund the R10.4bn (€524m) SAA business rescue plan to keep the airline in the air, to make more losses and continue to be a drain on taxpayers.”
Because there is an immediate need for funds, the department has also said that lending institutions will be requested to finance the restructuring process and to honour commitments for voluntary severance packages and retrenchments.
Lees said the DA had put pressure on the banks to not provide this funding. “It is irrational and immoral for the banks to be funding this vanity project of the ANC.”
“The industry and the market can barely find ways to survive as it stands without throwing more and subsidised capacity into the market,” said Rodger Foster, Airlink CEO and MD. He added that it perpetuated an un-level playing field. “It is subsidised competition.”
Likewise, executive manager and chief marketing officer of FlySafair, Kirby Gordon, said: “All we've ever asked for is an opportunity to compete in the local market on a fair playing field.”
Gordon added that it was also puzzling that Mango Airlines was not under business rescue despite being a wholly owned subsidiary of SAA. Moreover, as part of SAA’s proposed business rescue plan, Mango will benefit from a lump sum of approximately R1bn (€50.3m).