Ramaphosa not happy with SAA route cancellations, as more routes are cancelled

                                       South Africa President, Cyril Ramaphosa

President Cyril Ramaphosa is not happy with the decision of South African Airways’ business rescue practitioners to cancel certain routes as from the end of the month, reported eNCA on Friday.

Ramaphosa spoke on his way to Ethiopia to attend a meeting of the African Union.

“Government is not in agreement with the BRPs about the decision to cancel certain flights. We as government are saying we need to sit down with the BRPs and discuss the matter,” said Ramaphosa.

Subsequent to Ramaphosa indicating his unhappiness, the Ministry of Public Enterprises issued a statement on Friday afternoon saying government is concerned that “recent decisions concerning SAA have caused market and customer uncertainty that may jeopardise the long-term future of the airline”.

“Government will be making representations to the BRPs in order to balance the necessity for trimming unprofitable routes with the need to ensure the future sustainability of both the airline and SA’s aviation industry. This will necessitate a review of the BRPs’ recent announcement,” according to the statement.

“Our submission will include a proposal that the route network changes announced by the BRPs be reviewed to ensure the sustainability of the airline. Whilst understanding the impact of the business rescue process on the restructuring of routes, staffing and costs, the government and BRPs are both committed to a viable SAA as an outcome of this process.”

Ahead of SAA going into business rescue in December last year, Fin24 reported about concerns in the aviation industry that government might try to interfere with the BRPs in the execution of their duties. A business rescue expert said at the time that business rescue was aimed at “rehabilitating” a company in severe distress. A business rescue practitioner is appointed who has to run and restructure the business.

The business rescue expert argued that government would not be able to intervene in the business rescue process, as the power lies with the practitioners and their aim to put SAA on a sustainable footing and save jobs, or if the company can’t be saved, to ensure better returns for creditors. During business rescue, a company also receives protection against legal claims by creditors.

SAA’s BRPs announced on Thursday that SAA is cancelling all of its domestic routes apart from Johannesburg to Cape Town.

Urgent action

The BRPs, Les Matuson and Siviwe Dongwana, say the latest initiatives are aimed at supporting SAA’s transformation into a sustainable and profitable business, and in line with the urgent action required to conserve cash.

According to the latest announcement, all domestic destinations, including Durban, East London and Port Elizabeth, will cease to be operated by SAA on 29 February 2020. Domestic routes operated by Mango will, however, not be affected by the changes.

“On the domestic route network, SAA will continue to serve Cape Town on a reduced basis.”

On the same date, SAA will also close the regional and international services from Johannesburg to Abidjan via Accra, Entebbe, Guangzhou, Hong Kong, Luanda, Munich, Ndola, and Sao Paulo.

SAA will continue to operate all international services between Johannesburg and Frankfurt, London Heathrow, New York, Perth and Washington via Accra.

Regional services to be retained include from Johannesburg to Blantyre, Livingstone, Dar es Salaam, Harare, Kinshasa, Lagos, Lilongwe, Lusaka, Maputo, Mauritius, Nairobi, Victoria Falls and Windhoek.

Fin24 attempted to contact the BRPs for comment on Ramaphosa’s latest reaction, but at the time of publication had not obtained a response yet. This article will be update should a response be received.

 

 

Source: Fin24