Money-losing South African Airways (SAA) has
entered into the South African version of Chapter 11 bankruptcy as part of what
the country’s government calls a "radical restructuring process" aimed at
saving the state-owned airline.
"This is the optimal mechanism to restore confidence in SAA
and to safeguard the good assets of SAA and to help restructure and reposition
the entity into one that is stronger, more sustainable and able to grow and
attract an equity partner," South Africa minister of public enterprises P.J.
Gordhan said in a statement Thursday.
SAA said it would soon publish a provisional flight
schedule. SAA's U.S. gateways are Washington Dulles and New York Kennedy.
Gordhan said that the bankruptcy proceeding, called "business
rescue" in South Africa, would allow SAA to continue operating in an "orderly
and safe manner." During the process, SAA will operate under the direction of
an administrator called a business rescue practitioner.
As part of the rescue, Gordham said, South Africa's treasury
will provide SAA with two 2 billion rand ($136.5 million). In addition,
existing SAA lenders will provide 2 billion rand. The loans will be
guaranteed by the government.
The rescue, Gordham explained, will prevent a disorderly
collapse of the carrier. The rescue period will also be used to review the
airline's cost structure with a goal of making it more sustainable and more
attractive to an investment partner.
Todd Neuman, SAA's executive vice president for North
America, wrote in an email, "We recognize that this business rescue process
presents many challenges and uncertainties for our valued customers, travel
advisors and business partners."
Neuman added that the restructuring won’t impact the
operations of SAA sister carriers Mango Airlines, South African Express and
The Association of Southern African Travel Agents said
Thursday that at this early stage it is unclear what the restructuring measures
will mean for the South Africa travel industry and for travelers.
"Every effort must be made to ensure that consumers' holiday
plans are not disrupted, and that the reputation of Brand South Africa remains
intact," said Otto de Vries, CEO of the travel agent group.
SAA's bankruptcy filing followed an eight-day strike by two
of the carrier's unions in late November. The strike forced the cancellation of
hundreds of flights.