An SA Express aircraft. Picture: GALLO IMAGES/GETTY IMAGES/BRIAN BAHR
An SA Express aircraft. Picture: GALLO IMAGES/GETTY IMAGES/BRIAN BAHR

The government is mulling whether it should oppose SA Express’s business rescue practitioner’s court application to have the ailing state-owned airline liquidated.

Business rescue practitioners Phahlani Mkhombo and Daniel Terblanche lodged an application in the high court in Pretoria on March 25, asking that SA Express be placed into provisional liquidation.

They also asked that the court to order that the business rescue process be discontinued.

The department of public enterprises on Sunday said it would decide after studying the liquidation application.

The government will have to decide whether it will oppose the decision to liquidate the airline, which it has been against in the past.

SA Express suspended operations just over a week ago due to the Covid-19 crisis in SA and in light of the 21-day national lockdown.

It is expected to be among the first organisations to apply to the UIF temporary employee relief scheme (Ters) for assistance, under the expedited Covid-19 benefit.

The airline did not pay salaries for March, making it the first state-owned entity (SOE) to run out of cash.

SA Express is in business rescue after a creditor brought a successful court application in February. Unlike SAA, which has been provided R5.5bn of post-commencement finance by the National Treasury, SA Express has not received any assistance to finance the rescue process. The airline employs nearly 700 people.

Terblanche, in an affidavit to the court on behalf of the business rescue practitioners, said there was no “reasonable prospect for SA Express to be rescued”. 

“The urgency for SA Express to be placed in provisional liquidation arises due to the fact that SA Express continues to incur liabilities and existing liabilities continue to accrue despite the operations of SA Express having ceased on March 17 2020,” he said.

Terblanche explained how post commencement financing had not been secured and how the airline needed to pay its 691 employees by the end of March.

“I respectfully submit that the appointment of a liquidator needs to happen on an urgent basis so that the liquidator can take control of the assets of SA Express with a view to discharge its liabilities. It is also critical that the liabilities of SA Express cease accruing,” he said.

Terblanche said that according to SA Express’s own financial information, it owes creditors more than R2bn. This includes provision of a little over R163m for gurantess at risk of being called and contingent claims that will arise from the insolvency of the airline. Claims submitted by creditors in the business rescue process to date amount to about R173m.

Terblanche said he and Mkhombo had approached commercial banks and other development finance institutions in an effort to secure post commencement financing, however, the banks have indicated their reluctance to provide any further funding, even with the support of a government guarantee.

In a report submitted to the court with its application, the business rescue practitioners accused the department of public enterprises of interfering in the process and of not providing the PCF.

The department said the allegation by the business rescue practitioners that the government deliberately withheld financial support to the rescuers and that the department’s approach to the process was unconstructive, were baseless.

It said the government considered an initial funding proposal from the rescuers, but this unfortunately did not meet the basic requirements. It  lacked a credible business case that could enable the unlocking of the required PCF that would allow the rescue process to proceed and for a long-term plan to be developed.

“The long-term plan (business rescue plan) needed to take into consideration the commercial viability of the airline in a competitive and volatile SA aviation sector. The advent of the coronavirus pandemic quickly compounded our economic situation as it introduced unprecedented risk to humanity and exposed our economic fragility as a nation. Therefore, considering the reduction of passenger traffic in the market, the business rescue plan had to take into account the recent changes in the market,” the department said.

It was in this context that the department needed to see a business rescue plan that is resilient so the proposition could withstand a whole new business environment, it said.

quintalg@businesslive.co.za