South Africa to replace SAA with ‘new national carrier’

Johannesburg: South Africa´s cash-strapped national carrier will be replaced by a new airline after years of mismanagement and debt, the government said on Friday, as plans for its rescue have been marred by the coronavirus outbreak.

South African Airways (SAA) was placed under a state-approved turnaround plan in December as a last-ditch resort to save the company from total collapse.

All its flights have been grounded since South Africa closed its borders and went into a five-week nationwide lockdown in March to curb the spread of COVID-19.

Last month, the government turned down a request for 10 billion rand ($531 million) of extra funding by SAA´s business administrators, claiming resources had been stretched by the pandemic.

The ministry of public enterprises on Friday said a "new and bold approach" would be required for South Africa to maintain a competitive airlift capacity after the "fog of economic uncertainty" caused by coronavirus.

"The creation of a new, dynamic airline, with the correct corporate structure... will allow for the new SAA to compete in the post COVID-19 world," said the ministry in a statement.

"The new national carrier will be well positioned to take to the skies again and contribute to the South African and African economy."

No clear timeline was given for the creation of the "new restructured airline" that will involve both public and private participation. According to the ministry, it will be funded by a range of parties that will allow the state to "continue to play a key role".

SAA employs more than 5,000 workers and is Africa´s second-largest airline after Ethiopian Airlines.

Like most South African state-owned enterprises (SOEs), it has failed to make a profit for more than a decade and survives on government bailouts.

"The transition to the new airline may require sacrifices," the statement said, adding that employees "may be displaced".

To date South Africa has recorded at least 5,647 coronavirus cases -- the highest in Africa -- including 103 deaths.

Some confinement measures were lifted on Friday and economic activity is slowly beginning to resume in certain sectors.

But Transport Minister Fikile Mbalula on Friday said it was still too early to think of ending air travel restrictions.