South African Airways to cut routes in rescue effort

South African Airways (SAA), which entered a form of bankruptcy protection in December, will scale back some of its domestic and international routes from the end of February, specialists appointed to try to rescue the airline said on Thursday.

State-owned SAA will also seek to deploy more fuel-efficient aircraft, renegotiate contracts with suppliers, reduce the number of its employees and consider asset sales as part of rescue efforts, the specialists said in a statement.

SAA is among several South African state entities including power company Eskom that are mired in financial crisis after nearly a decade of mismanagement.

The airline hasn’t made a profit since 2011 and has received more than 20 billion rand ($1.35 billion) in bailouts over the last three years.

SAA business rescue practitioners Les Matuson and Siviwe Dongwana said that from February 29 the airline would end international routes to Abidjan via Accra, Entebbe, Guangzhou, Hong Kong, Luanda, Munich, Ndola and Sao Paulo.

Domestic flights to Cape Town will continue on a reduced basis, and SAA will cease operations to Durban, East London and Port Elizabeth, also from February 29.

International services between Johannesburg and Frankfurt, London Heathrow, New York, Perth and Washington via Accra will be retained.

“The initiatives we are taking now will strengthen SAA’s business,” Matuson and Dongwana said in the statement.

“The decisions and actions announced today are aimed at improving SAA’s balance sheet, creating a platform for a strong and sustainable airline and ensuring that the company is more attractive for potential strategic equity partners.”

The rescue experts are due to publish a restructuring plan in late February that will be presented to creditors for approval.

Their statement said customers booked on any cancelled international routes would receive a full refund. Passengers on cancelled domestic flights will be accommodated on low-cost SAA subsidiary Mango Airlines.

Repeated bailouts for cash-strapped state firms have stretched South Africa’s public finances, hurting the country’s credit ratings.

Moody’s is the last of the major international agencies to keep an investment grade rating on the sovereign and is scheduled to review that assessment in March.


Separately, a court on Thursday ruled that another state airline, SA Express, be placed in business rescue, the same form of bankruptcy protection affecting SAA.

The court case relates to a dispute between the airline and a contractor, Ziegler.

SA Express, which serves destinations in southern Africa and is a separate business from SAA, said it would appeal the judgment.

“It is clear that the court went over and above what was required and granted orders not sought by the applicant,” the airline said in a statement.

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