Opposition calls for urgent meeting to rescue state airliner

August 27, 2016 6:54 AM

Democratic Alliance, South Africa's opposition political party has called on the government to help save the country's official airline from going bankrupt.

Passengers board a South African Airways Boeing 737 aircraft at the Kamuzu International Airport in Lilongwe in a file photo. REUTERS/Siphiwe Sibeko

South Africas main opposition the Democratic Alliance (DA) called on Friday for an urgent parliamentary meeting to work out how to prevent the state airline from missing payments to its creditors and being grounded by international partners.

Hong Kong's tax authorities this week threatened to ground South African Airlines if the struggling airliner did not provide financial statements by Sept. 6.

SAA has failed to submit financial statements for the past two years, with results for 2015/16 held back by Treasury's refusal to grant the loss-making carrier 5 billion rand ($356 million) in additional guarantees.

If SAA does not file an earnings report it cannot get government guarantees and ensure payment for services in airports, including Hong Kong.

In a statement late on Friday, the airline said it was able to and continued to pay its debts as and when they become due and payable.

Finance Minister Pravin Gordhan, who is leading a turnaround strategy that includes a new board, asked parliament last month to push back the release of SAA's 2015 earnings report to September as his department considers whether to grant the company the money it needs to stay afloat.

Marred by controversy and financial mismanagement, the airline has been surviving on state guarantees of around 14.4 billion rand and has been singled out amongst other state companies by ratings agencies as a major risk to the country's investment grade status.

The DA said this week's abrupt resignation of the carrier's audit head Yakhe Kwinana, a pending 250 million rand loan repayment, and an impasse between SAA Chairwoman Dudu Myeni and the finance minister were pushing the state firm to an almost certain collapse.

"Even worse is that SAA's 14.4 billion rand in government guarantees has been completely depleted, leaving it without any options," DA Member of Parliament Alf Lees said in a statement.

"If a further bailout from government is to be avoided SAA must immediately be placed under business rescue," Lees, the deputy shadow finance minister, said, referring to a process to grant temporary protection from creditors.

SAA said it was in talks with authorities to ensure it complies with regulations.

"It is highly unlikely that there will be service interruptions in September and/or October anywhere on our route network, including Hong Kong, due to the grounding of our aircraft," the airline said.

The Treasury under Gordhan and President Jacob Zuma have disagreed about government spending, including at loss-making state companies like SAA, analysts say.

Widely respected Nhlanhla Nene was axed as finance minister in December just weeks after he vetoed a plan by Myeni to amend a cost-saving deal with the French manufacturer Airbus.

On Thursday, the presidency defended plans to give Zuma supervision over state-owned firms after Gordhan's allies said this would limit the finance minister's control.

Gordhan's plan to save money at the carrier also includes cancelling unprofitable routes, but Zuma told a cheering and clapping SAA staff in May that the airline's board should be thinking about adding routes rather cancelling them.