Market jitters over the future of SAA on Thursday saw one of SA’s largest travel ticket retailers decide to stop selling SAA tickets and a top travel insurer withdrawing insolvency cover for tickets sold going forward.
The news came as government officials from the National Treasury and the department of public enterprises met behind closed doors to discuss the future of the insolvent airline, which needs a government loan guarantee to continue trading. Without this SAA faces either liquidation or business rescue.
Flight Centre Travel Group (FCTG) has informed its customers and SAA of its decision to stop selling SAA tickets, while Travel Insurance Consultants (TIC) has decided to exclude the ailing airline from its travel supplier insolvency benefit, according to travel industry website eTNW.
TIC is owned by Santam insurance.
The Treasury and public enterprises department started interactions this week as the airline needs at least R2bn immediately to pay salaries and suppliers or cease trading. Commercial banks are willing to advance the money but only on receipt of a full loan guarantee from the Treasury.
SAA spokesperson Tlali Tlali said: “We are aware and have received a notification to this effect. It is an unfortunate state of affairs. We will find ways to engage with the stakeholders and the markets as we seek to manage the situation the best way possible.
Asked for comment on SAA’s financial status, Tlali said: “We have expressed our funding requirements to obtain working capital so that we ensure day-to-day operations. In the event, there are noteworthy developments which we will communicate appropriately. We now await the shareholders for a decision on this.”
Finance minister Tito Mboweni said: [public enterprises] minister Pravin Gordhan and myself, together with other colleagues and with the support of the president [Cyril Ramaphosa], are working hard to find solutions to the challenges at SAA and other SOEs. We will find solutions in the best interest of SA.”
The department of public enterprises was not immediately available for comment on Thursday evening.
Andrew Stark, FCTG MD for the Middle East and Africa, said it was the first time that the company had to issue a stop-sell on SAA, according to eTNW.
“Following mixed messages from the government about whether the airline will be bailed out and the decision from insurance companies to exclude SAA from their insolvency cover, we have had to make an immediate move to mitigate the risk to ourselves and our clients,” he said.
An application for business rescue has already been brought by trade union Solidarity but there is some doubt about whether it will succeed as business rescue requires a reasonable prospect of success. In SAA’s case, this would mean the availability of funds for the airline to trade its way out of distress.
Liquidation could be catastrophic. SAA is insolvent with liabilities exceeding assets by R17.8bn in 2017, the last year in which the company published annual financial statements