June 22, 2020 / 3:50 PM / 15 days ago

South Africa to oppose Airlink's bid to halt SAA creditors meeting

JOHANNESBURG (Reuters) - South Africa plans to oppose an application by regional airline Airlink to put South African Airways (SAA) into provisional liquidation and prevent a meeting of SAA’s creditors to discuss a restructuring plan, the government said on Monday.

FILE PHOTO: A South African Airways (SAA) plane is towed at O.R. Tambo International Airport in Johannesburg, South Africa, January 18, 2020. Picture taken January 18, 2020. REUTERS/Rogan Ward/File Photo

Airlink was a franchisee of state-owned SAA for over two decades, an arrangement that allowed SAA to sell tickets and fly passengers on Airlink flights. SAA still owes some fees to Airlink, making the latter an unsecured creditor.

SAA went into a form of bankruptcy protection in December and since then state-appointed administrators have been trying to see what they can salvage.

SAA’s creditors were due to meet on Thursday this week to consider a proposed business rescue plan for the airline.

The restructuring plan, which would involve laying off about 90% of staff, leaving just 1,000 jobs, will cost at least 10 billion rand ($575.5 million). That is on top of the 20 billion rand that has been spent keeping the airline afloat over the past three years.

But the Department of Public Enterprises said on Monday it had been notified of a court application by Airlink to stop the meeting taking place and that unions had separately taken action to stop the meeting.

The proposed SAA business rescue plan prejudices concurrent creditors (unsecured creditors) of the company including Airlink, the private carrier said in a statement on Monday.

The plan benefits the government which will “own an unencumbered business, funded by concurrent creditors, but still commercially insolvent”, Airlink added.

The ministry said it would approach the court to oppose Airlink’s application that SAA be placed under provisional liquidation.

“It is disturbing that a competitor of SAA, which is 100% privately owned, as well as two labour unions, who should be acting in the best interest of their members, are seeking to destroy SAA by forcing a liquidation through the courts,” the Department of Public Enterprises said.

In response, Airlink said it was not a competitor of SAA and had been a franchisee of the airline for 23 years.

Airlink terminated the franchise agreement earlier this year when SAA failed to pay over 700 million rand of revenue for tickets issued on flights flown by the private airline.

The unions, which include NUMSA and SACCA, did not immediately respond to requests to comment. They have rejected job cuts proposed to rescue the cash-strapped airline.

Rescue efforts for SAA have been the subject of fierce wrangling between the government, which wants SAA retained as a national asset, and the administrators who took over the airline in December after almost a decade of financial losses.

($1 = 17.3766 rand)

Reporting by Tanisha Heiberg and Promit Mukherjee; Editing by Jane Merriman and Pravin Char

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