South African Airways gets $272 mln lifeline as it enters business rescue
South African Airways (SAA) was set to enter a business rescue process on Thursday, with a 4 billion rand ($272 million) lifeline from government and banks announced by a minister.
State-owned SAA, which has not made a profit since 2011 and has depended on government bailouts to stay solvent, said it would try to operate a new provisional flight schedule.
In a business rescue, a specialist practitioner takes control of a company with the aim of rehabilitating it to improve its chance of survival, or securing a better return for creditors than they would receive from liquidation.
SAA said the process sought to provide the best prospects for “selected activities within the group to continue operating successfully”.
The airline was hit by an employee strike last month that forced it to cancel hundreds of flights and pushed it to the brink of collapse. Then two major travel insurers stopped covering its tickets against the company becoming insolvent.
On Wednesday, a deputy minister, who declined to be identified due to the sensitivity of the matter, told Reuters he had received an official letter saying President Cyril Ramaphosa had called for a change of approach on SAA and that the airline would enter “voluntary business rescue”.
Pravin Gordhan, minister of public enterprises, said in a statement on Thursday that business rescue was the best way to restructure SAA into a stronger entity. He said the plan was still to attract an equity partner.
Existing lenders would provide SAA 2 billion rand of loans guaranteed by government and repayable out of future budget appropriations. Government would provide 2 billion rand in a “fiscally neutral manner”, Gordhan said.
SAA’s government-guaranteed debt would not be affected by the business rescue process, Gordhan said, but analysts expect other creditors to suffer losses.
Hans Klopper of BDO Business Restructuring said the rescue process for SAA could be fraught with difficulty and that it could take months if not years to find a solution to the airline’s problems.
A relatively small amount of SAA’s assets could be recoverable. The rescue process could further dent confidence in the airline, he said.
“If there aren’t willing patrons prepared to book flights then the bottom falls out of the whole business,” Klopper said.
“With SAA there is a structure of devastation, but you may have somebody who comes in and offers, say, 1 cent on the rand. Because some creditors could get zero if there is a liquidation.”
Norwegian Air slashed November traffic to stem losses
Budget carrier Norwegian Air sharply curtailed its flight programme last month, removing unprofitable routes in a bid to stem the company’s losses, its traffic report showed on Thursday.
The airline’s overall capacity, a measure of distance flown and the number of seats available (ASK), declined by 27% year-on-year, it said. Analysts in a Reuters poll had on average expected a 23% fall.
The move allowed Norwegian to better fill remaining flights, raising the number of seats sold on each aircraft and boosting its yield – income per passenger carried and kilometre flown – by 12% to 0.37 crown, beating a 0.35 crown forecast.
Norwegian has shaken up the transatlantic travel market with low fares, but breakneck expansion also brought mounting debts and losses, and in November the company raised cash from its owners for a third time in 20 months.
The company on average filled 83.0% of seats in November, up from 78.8% last year and beating an average forecast of 82.3% in the Reuters poll.
“The planned capacity reduction has improved the figures … we continue to deliver on our strategy of moving from growth to profitability,” Norwegian‘s acting Chief Executive Geir Karlsen said in a statement.
Hong Kong Airlines says it has drawn up plans for cash infusion in fight to keep licence
Hong Kong Airlines said on Wednesday it had drafted an “initial cash injection plan” that would allow it to make overdue salary payments on Thursday as the carrier battles to keep flying.
Hong Kong’s Air Transport Licensing Authority (ATLA) said on Monday that it had attached new conditions to the airline‘s licence, requiring it to raise money and maintain cash levels whose details were not disclosed.
ATLA said if the conditions were not met, a decision on whether to suspend or revoke the licence of airline, partly owned by cash-strapped Chinese conglomerate HNA Group , would be announced by Dec. 7.
“Following urgent consultations, an initial cash injection plan has been drawn up,” Hong Kong Airlines said in a statement on Wednesday. “Outstanding salary to staff will be paid on 5 December 2019 and our services will gradually resume to normal as soon as the funds arrive.”
An airline spokesman did not respond immediately to a request for comment on the source of the funds.
Hong Kong Airlines and larger rival Cathay Pacific Airways Ltd are battling a steep decline in demand as a result of months of anti-government protests in the Asian financial capital.
Hong Kong Airlines was in a precarious financial position even before the unrest. The unlisted company in April told shareholders it had lost HK$3 billion ($383.39 million) in 2018, according to people with knowledge of the matter.
Bank of China Group Insurance said on Tuesday some of its insurance plans would no longer cover bookings on Hong Kong Airlines, according to a statement on its website.
The airline has announced several capacity cuts, including the suspension of flights to Vancouver, Ho Chi Minh City and Tianjin.