South African Airways (SA, Johannesburg O.R. Tambo) will be looking to sell assets in order to raise cash as banks are refusing to grant the ailing carrier any more loans, City Press has reported. As the airline is “technically bankrupt”, it will also turn to the state for another bailout.
Among the assets earmarked for sale are Air Chefs, SAA’s catering arm, and the carrier’s cargo unit.
SAA Cargo is one of the few profitable units of the South African Airways Group; it earned a ZAR387 million rand (USD27 million) profit in the last financial year.
Decisions have not been taken yet, but the group’s board is reportedly looking at separating the cargo unit from the passenger mainline (possibly through its own Air Operator’s Certificate) and then outsourcing the operation to a private third party.
According to a confidential document presented to the board by CEO Vuyani Jarana, the South African flag carrier is currently in a desperate financial situation. As of July 31, its debt amounted to ZAR28 billion rands (USD2 billion), while SAA’s assets were only ZAR13 billion rands (USD910 million). The airline is projected to lose ZAR6 billion rands (USD420 million) in the current fiscal year as the management is struggling to contain the bloated costs.
Given such a poor standing, the airline is struggling to loan any more money on commercial terms and would seek another bailout from the government. It already received a ZAR3 billion rand (USD210 million) injection in 2017 which prevented default on a Citibank loan.
The airline currently has some ZAR19.1 billion rand (USD1.3 billion) worth of state guarantees.
The same report said that the airline would need ZAR21.7 billion rand (USD1.5 billion) in external capital through 2021, when it hopes to achieve financial self-sustainability. Out of this amount, ZAR12.5 billion rands (USD870 million) would need to come from the government with the remainder sourced commercially from banks.