South African Airways creditors approve $1.6 billion rescue

South African Airways creditors and unions approved a rescue plan that includes at least 26.7 billion rand ($1.6 billion) in state funding and thousands of job losses.

Voters representing about 86% of those eligible supported the package, first proposed by administrators for the bankrupt carrier a month ago. The motion overcame the 75% threshold after most labor groups agreed to sweetened severance packages last week, clearing the way for the workforce to be cut by almost 80% to 1,000 people.

All eyes now turn to the National Treasury, which will need to find about 10 billion rand more than previously allocated for SAA at a time when state finances are severely stretched by the coronavirus pandemic. Finance Minister Tito Mboweni has repeatedly voiced his reluctance to provide further bailouts to a carrier that hasn’t made a profit in almost a decade, putting him at odds with Public Enterprises Minister Pravin Gordhan.

According to SAA’s business-rescue plan published June 16, the Treasury needs to provide a written commitment to provide the funding by Wednesday or the proposals will be deemed unimplementable. The administrators expect to receive a confirmatory letter, Siviwe Dongwana, one of the lead architects of the recovery plan, said at the creditors’ meeting on Tuesday.

Read More: Gordhan Stakes His Reputation and South Africa’s on Airline

“By giving the government the green light to massage its political ego through this multi-billion dollar nightmare, the creditors have spirited away finds that are desperately needed to cope with the coronavirus as well to stimulate the economy,” Alf Lees, a lawmaker for the opposition Democratic Alliance, said in a statement.

Gordhan’s department has said private investors and potential airline partners have expressed interest in taking part in the restructuring of the national carrier, which may help relieve the burden on the state. Speaking at the meeting, Kgathatso Tlhakudi, acting director-general of the department of public enterprises, said the government is looking for an adviser to work on a sales process.

SAA was placed in administration in December after surviving on bailouts and government debt guarantees for several years. Initial work on a recovery plan was torpedoed by the Covid-19 pandemic, which grounded all the carrier’s commercial passenger planes from late March.

The government said earlier Tuesday Philip Saunders has been appointed acting chief executive officer, a promotion from chief commercial officer.