Airlink has applied to the South Gauteng High Court on an urgent basis to interdict South African Airways and SAA’s business rescue practitioners from convening a meeting of creditors to consider the business rescue plan prepared by the practitioners and call for a vote on the plan. Airlink will also seek to have the business rescue process terminated, the appointment of its business rescue practitioners (BRPs) set aside and apply for SAA be placed in provisional liquidation. The Court has agreed to hear the matter this Wednesday, 24 June 2020.
Airlink and SAA are not competitors as alleged by the Department of Public Enterprises. For the past 23 years, Airlink has been a franchisee of SAA, feeding traffic onto its mainline services in terms of a franchise agreement with the state-owned carrier. Earlier this year Airlink terminated the franchise agreement after SAA went into business rescue and failed to pay over more than R700 million of revenue for tickets issued on flights flown by Airlink.
Airlink’s Court application is driven by four fundamental motives:
The proposed SAA business rescue plan prejudices concurrent creditors, including Airlink, to the benefit of SAA’s shareholder, the Department of Public Enterprises, which will then own an unencumbered business, funded by concurrent creditors, but still commercially insolvent.
The plan is commercially implausible, especially given the uncertain outlook for the industry after the COVID-19 crisis. It also fails to meet the Government’s stated objective of establishing an airline that would be sustainably viable and independent of the fiscus. The plan requires taxpayers to prop up the company for several years post rescue. The plan is still conditional, SAA remains commercially insolvent on the business rescue practitioners’ own version, and there is no indication as to how they plan and the expected losses will be funded.
All creditors – including Airlinkd- deserve a fair deal based upon a reasonable settlement.
The SAA business rescue practitioners are not adequately independent as contemplated in the Companies Act.
The establishment of the proposed "new" South African Airways will cost the taxpayer an estimated R21 billion, according to a leaked draft business rescue plan compiled by rescue practitioners Siviwe Dongwana and Les Matuson.
SAA, which last made a profit in 2011, has been in business rescue since December 2019. Since 2003 it has received over R31 billion in government bailouts and its recently-released financial statements reveal that SAA has made losses of R10.4 billion in the past two years.