Picture: GALLO IMAGES/GETTY IMAGES/BRIAN BAHR
Picture: GALLO IMAGES/GETTY IMAGES/BRIAN BAHR

Cash-strapped state-owned airline SA Express is facing an application for liquidation because it cannot pay its debts.

The application has been brought in the Gauteng High Court by aircraft leasing company Solenta Aviation on the basis of the nonpayment of R87.3m and would be heard on August 11, if it is not opposed.

But SA Express acting CEO Victor Xaba said the airline did intend to oppose the application because of a dispute over the amount owed.

He said the airline was engaging with legal counsel and Solenta in a bid to find an amicable solution, and gave the assurance to creditors, customers and stakeholders that SA Express was in not in financial distress and was able to pay its debts.

The application for liquidation comes hot on the heels of South African Airways’ inability to repay a R2.3bn loan to Standard Chartered Bank, which required Treasury to step in with a cash injection for this amount.

SA Express also experienced a cash crunch in February, when it was unable to repay bank loans of R150m, and it was only through government intervention that agreement was reached on a repayment plan.

The airline has been in the financial doldrums for several years and made an unaudited loss of R234m loss in the 2016-17 financial year.

Solenta Aviation director of flight operations Stephen Jolly says in his affidavit that SA Express owes the company R87.3m for the lease of aircraft and other services provided between October 2016 and June this year, and that the airline “is unable to discharge its indebtedness”.

He said Treasury and the Department of Public Enterprises had been informed about this nonpayment but they had merely noted receipt of the information.

Jolly said SA Express’s failure to pay the monthly lease costs of about R12m dated back to September last year.

Solenta gave SA Express notice on March 1 that its three aircraft would be grounded which meant the termination of further flights until the money was paid. It stressed, however, that this notice did not mean the termination of the lease agreement.

According to Jolly SA Express wrote to Solenta on April 5 saying that by issuing a grounding notice, Solenta had terminated the lease agreement as of March 4, but Solenta did not accept this.

On May 17 SA Express proposed a payment plan of nine equal monthly instalments, starting end-May until end-January, to pay its debts — which Jolly said was an acknowledgment of indebtedness and an act of insolvency under the Insolvency Act.

The lease agreement was for the lease of three aircraft and supply of personnel between June 2016 and December 2016, with an additional aircraft being available for lease on an ad hoc basis until November last year. This agreement was extended until January by mutual consent and was extended for a further period from February 1 to end-July.

SA Express agreed to pay a fixed monthly amount for 150 guaranteed flight hours of $300,000 under the initial agreement and $270,000 for the current agreement.

Over and above this an additional amount of $1,200 per hour under the initial agreement and $1,300 per hour under the current agreement was payable for hours above the guaranteed 150 flight hours per month.

Payment was to be made on a monthly basis or within 30 days.

In March Public Enterprises Minister Lynne Brown told Parliament that a dedicated war room had been created within the Department of Public Enterprises to nurse the loss-making domestic and regional airline back to health. She said it needed R121m in working capital and a further extension of its state guarantee of R1bn.

Over the years SA Express has struggled to convince the auditor-general of its status as a going concern. Acting CEO Victor Xaba who was seconded from Denel Aerostructures and took over in April after the departure of former CEO Inati Ntshanga.

Please login or register to comment.