The decision by embattled South African Airways (SAA) to suspend all international and regional flights until the end of May in response to South Africa’s new travel regulations has increased the risks that the airline might finally go out of business.
This is according to an expert from accounting and advisory firm Mazars, Justine Hoppe.
Hoppe, a director responsible for recovery and restructuring at Mazars, said the effect of Covid-19 on the aviation industry will exacerbate the already precarious position in which SAA finds itself.
However, Hoppe said there is a possibility, SAA to be wound down in a structured and controlled manner within Chapter 6 of the Company’s Act resulting in the complete shut down of the company but avoid liquidation
“However, with the added pressure of the recently suspended flight routes, liquidation does become an increasingly looming possibility for SAA,” Hoppe said.
“At any point in time, if the scales tip and it looks as though a better return to creditors will be achieved in liquidation, the business rescue practitioners will be under increasing pressure to terminate rescue proceedings and immediately apply for SAA’s liquidation.”
Government in December placed SAA in business rescue following years of underperformance and numerous multi-billion rands bailouts by taxpayers.
The cash-strapped airline in January announced the cancellation of all its domestic routes apart from the popular Cape Town – Johannesburg flight in an effort to save costs.
SAA’s business rescue practitioners Siviwe Dongwana and Les Matuson on Friday said they need another two months to present their plan to save the national carrier, due to the Covid-19 pandemic. The plan was initially expected at the end of this month.
“Given the early stages of Covid-19 and the measures implemented by the Cabinet, the practitioners are of the view that this assessment will not, realistically, be finalised before March 31, 2020.”
