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South African Airways 'is on verge of bankruptcy'

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South African Airways (SAA) has run out of money and is teetering on the edge of bankruptcy, according to information given to the country’s parliament.

It is thought the national carrier may soon be unable to pay salaries.

The cash-flow statement shown to MPs and seen by the BBC paints a picture of an airline haemorrhaging cash.

It says that matters may improve by October, but only if it gets a 792m-rand (£45m) bailout from the government.

Even then, the situation is expected to deteriorate again by December with a forecast cash outflow in that month of £38m.

The airline has lost money in each of the past seven years. Acting chief executive Musa Zwane, who has led the company for the last 18 months, has been trying to put together a recovery plan since January.

“Essentially insolvent”

Last month, the Treasury paid out £125m to settle a loan from Standard Chartered Bank‚ which the bank had refused to extend.

South Africa’s Finance Minister, Malusi Gigaba, has disclosed that SAA asked the Treasury in March for a £560m recapitalisation. He is expected to give an answer by October.

Alf Lees, the deputy finance spokesman of the opposition Democratic Alliance, said: “Essentially they are insolvent and should have filed for liquidation.

“We believe that the directors are in breach of the South Africa companies act by continuing to trade recklessly knowing that SAA will not be able to meet its financial commitments and without any guarantee that the shareholder (the South African government) will be prepared to continue to bail them out.”


Source: BBC