“Technically Bankrupt” South African Airways “Finances in Tatters”

According to a report by the Johannesburg City Press, just months after a huge government bailout saved the carrier from liquidation, South African Airways is again seeking subsidies to keep the lights on, but government auditors have expressed doubts that the airline will ever recover. As debts and financial losses mount, the Star Alliance member is said to be on the verge of selling substantial assets in a last-ditch effort to stay afloat.

Faced with mounting debt and little access to capital, Star Alliance member South African Airways is reportedly considering a desperate bid to sell assets in an effort to keep flying. Although the airline is armed with treasury-backed guarantees, banks have soured on the company’s prospects and are refusing to lend the flag-carrier (which is already carrying greater debts than assets) any more money.

Even government regulators have expressed doubts about the national airline’s future. This is despite spending millions of taxpayer dollars to keep the carrier out of default just last year. Airline executives, however, say that as a major shareholder the government has an obligation to help fund the airline’s operations until turnaround efforts begin to show results.

“Banks have walked away from us despite our guarantees from Treasury,” a senior SAA executive who asked that his name not be used told the Johannesburg City Press this week. “It is true that they don’t want to fund us. They will only fund us once they see a path to debt reduction. If you are a shareholder of a company and you are unable to source funds from banks, what do you do? You have to step in and rescue the situation, to the extent that you believe the turnaround strategy is worth the paper it is written on.”

The airline executive admitted to reporters that the “technically bankrupt” airline’s finances are “in tatters.” In addition to cost-cutting measures, SAA officials say that the airline is keen to shed assets, including the company’s lucrative freight operations and onboard catering services. Despite the ominous financial omens, airline officials say that the carrier is very much on the road to returning to profitability – at least in its public statements.

“We will soon address the media on the progress we have made, milestones, and the path that lies ahead in transforming SAA,” airline spokesperson Tlali Tlali told the newspaper on Sunday. “We are confident that the airline is moving in the right trajectory and we are making steady progress.”