Creditors, employees and investors of South African Airways have today, Tuesday 14 July 2020, voted to accept a major restructuring of the airline.
The vote, which was carried out by proxy, required a 75% majority. It ultimately received an 86% vote in favour.
The plan proposed by the airline’s business rescue practitioners will effectively involve the creation of a new, and substantially smaller, airline. It is likely that the new airline will be majority state owned, with the possibility of minority private investors.
The South African government will provide funding for the airline and appoint an interim board. Phillip Saunders, currently Chief Commercial Officer, will be appointed interim Chief Executive and will be charged with appointing a new management team and implementing the restructuring.
Out of 3,700 employees of South African Airways, only 1,000 will be retained. A number of trade unions, with the exception of the South African Airways Pilots Association, have accepted voluntary severance packages.
The state owned airline was placed in a business rescue process in late 2019. It has had a long history of financial losses and allegations of political interference and mismanagement. Even before the disruption due to COVID-19, it had suspended a large number of international, regional and domestic routes.
In terms of where this leaves South African Airways’ presence in London, before the suspension of scheduled passenger flights to South Africa, it operated one daily return flight to Johannesburg. A second Heathrow slot pair is leased to BA. Given how the new airline will be substantially smaller, it is hard to see a meaningful expansion to London.
In terms of other developments in South Africa, SA Express has been placed under provisional liquidation. Comair, which operates a BA franchise in Africa, is currently in a business rescue process. Creditors are due to vote on a business rescue plan for Comair later this month.