A distressed South African Airways to undergo restructuring

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South African Airways
Photo Credit: LO Kin-hei/Shutterstock

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 Airlink.  

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. 

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