THE South Africa's government will relinquish control of its loss-making flag carrier South African Airways (S) and give it financial support to avoid immediate insolvency. reports Bloomberg.
A court-appointed administrator will take charge and try and turn it around. Once that process is underway, the government will give it a ZAR2 billion (US$137 million) and provide guarantees to raise the same amount in new loans.
But the country's powerful unions are expected to fight job cuts the airline needs to return to profit and creditors will likely be reluctant to agree to losses.
'We do not see government coming up with a solution that definitively can work,' said Mapungubwe Institute for Strategic Reflection research chief Susan Booysen.
'Asking for S to be placed on urgent business rescue is an instrument that kicks the can into somebody else's court and says: 'Now, you solve it.' I fear that government is throwing in the towel,' she said.
S offers flights to more than 30 domestic and international destinations and has been operating since 1934, when the government took over the assets and liabilities of Union Airways.
The carrier has posted losses since 2012 as it grappled with the high operating costs of an aging, inefficient jet fleet and a bloated workforce.
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A court-appointed administrator will take charge and try and turn it around. Once that process is underway, the government will give it a ZAR2 billion (US$137 million) and provide guarantees to raise the same amount in new loans.
But the country's powerful unions are expected to fight job cuts the airline needs to return to profit and creditors will likely be reluctant to agree to losses.
'We do not see government coming up with a solution that definitively can work,' said Mapungubwe Institute for Strategic Reflection research chief Susan Booysen.
'Asking for S to be placed on urgent business rescue is an instrument that kicks the can into somebody else's court and says: 'Now, you solve it.' I fear that government is throwing in the towel,' she said.
S offers flights to more than 30 domestic and international destinations and has been operating since 1934, when the government took over the assets and liabilities of Union Airways.
The carrier has posted losses since 2012 as it grappled with the high operating costs of an aging, inefficient jet fleet and a bloated workforce.
WORLD SHIPPING