THE South African government has agreed to a ZAR10.5 billion (US$641 million) bailout for South African Airways (S) after failing to find an investor to rescue the already grounded carrier, reports Bloomberg.
The only potential backer to come forward was Ethiopian Airlines, Africa's biggest carrier, which was only interested in an operational role.
Finance Minister Tito Mboweni made the announcement in a budget policy statement, ending a long personal resistance to providing more funds to a company that hasn't made a profit for almost a decade and has long relied on state support.
The outlay adds to the ZAR16.4 billion the Treasury set aside over three years in February for South African Airways to repay its guaranteed debt and cover debt-service costs.
The fate of the national carrier has become an emotional topic in South Africa as the country struggles to recover from the Covid-19 pandemic and the longest recession since 1992.
Public Enterprises Minister Pravin Gordhan has argued that a new, competitive airline can still be created from the current S, but opposition parties, analysts and Mr Mboweni himself view the carrier as an expensive distraction at a time when state finances are severely stretched.
Airlines around the world are battling their own crises due a a slump in demand for air travel amid the pandemic, and the emphasis has been firmly on cutbacks rather than expansion.
S's funds will instead come from other South African government departments, with the biggest cuts to the allocations for police and tertiary education. Basic schooling and health will also give up capital for the benefit of the national airline.
The cash will be used for worker-severance packages and ticket refunds as well as basic startup costs, according to a rescue plan published by administrators in June.
S hasn't flown a commercial flight since its planes were grounded to contain Covid in March, and travel restrictions remain in place to several key destinations to prevent a resurgence in infections.
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The only potential backer to come forward was Ethiopian Airlines, Africa's biggest carrier, which was only interested in an operational role.
Finance Minister Tito Mboweni made the announcement in a budget policy statement, ending a long personal resistance to providing more funds to a company that hasn't made a profit for almost a decade and has long relied on state support.
The outlay adds to the ZAR16.4 billion the Treasury set aside over three years in February for South African Airways to repay its guaranteed debt and cover debt-service costs.
The fate of the national carrier has become an emotional topic in South Africa as the country struggles to recover from the Covid-19 pandemic and the longest recession since 1992.
Public Enterprises Minister Pravin Gordhan has argued that a new, competitive airline can still be created from the current S, but opposition parties, analysts and Mr Mboweni himself view the carrier as an expensive distraction at a time when state finances are severely stretched.
Airlines around the world are battling their own crises due a a slump in demand for air travel amid the pandemic, and the emphasis has been firmly on cutbacks rather than expansion.
S's funds will instead come from other South African government departments, with the biggest cuts to the allocations for police and tertiary education. Basic schooling and health will also give up capital for the benefit of the national airline.
The cash will be used for worker-severance packages and ticket refunds as well as basic startup costs, according to a rescue plan published by administrators in June.
S hasn't flown a commercial flight since its planes were grounded to contain Covid in March, and travel restrictions remain in place to several key destinations to prevent a resurgence in infections.
SeaNews Turkey