The question of funding was left hanging over plans for a new state airline after any ideas of tapping union investment companies for financing were quashed this week.

But a final plan by the business rescue practitioners to be presented tomorrow may begin to provide clarity on who will pay for the new airline and what form it could take.

With the government pushing for a "new" state-owned carrier to emerge from the ashes of SAA, speculation surfaced that union investment companies might invest. But the metalworkers union's Numsa Investment Company and the Mineworkers Investment Company, which is linked to the National Union of Mineworkers, poured cold water on this.

Numsa Investment Company CEO Khandani Msibi said the group did not have a strategy for the airline industry and prefers to focus investments in the biotech and financial services industries.

Msibi said he is aware of talk that the company could be interested but said this is not something it has considered. "We don't know anything about the airline industry and this topic hasn't been before our board."

Oren Fuchs, senior stakeholder manager at the Mineworkers Investment Company, said "it would make little commercial sense to invest in an airline".

This week the draft business rescue plan by SAA's business rescue practitioners said it will take R21bn to settle SAA's obligations and capitalise a new airline.

There’s got to be a sensible financial plan to accompany a realistic
business plan

Asked if the government should spendbillions on failed state-owned enterprises (SOEs) and a new SAA, deputy finance minister David Masondo said: "Government has no money. The key question for us is how does the government get money to spend. Once that question is settled, we can discuss how much should be spent and on what to stimulate the economy."

He added: "We have almost 700 SOEs, and we honestly do not need all of them. Many of the SOEs are a drain on our fiscus. We have to generate criteria according to which we decide which ones we need and for what. We also need to rethink the extent of government ownership in some of them."

Department of public enterprises spokesperson Sam Mkokeli said the aviation industry is "absolutely crucial to SA's efforts to fight the Covid pandemic and also crank up the economy from the doldrums".

The International Air Transport Association said it could take up to four years before 2019 revenue levels for international air traffic were reached.

Dawie van der Merwe, a business rescue practitioner and director at BDO Business Restructuring, said: "Where do you find this magnitude of capital? You have this run-into-the-ground national carrier but also an industry that has been decimated globally by Covid. Nobody wants to touch aviation."

Linden Birns, MD of Plane Talking, said most airlines, when starting out, require three or four years until they break even.

Any plan for SAA has to include "enough money for this period", he said.

"It's not just settling debts, renegotiating leases, downsizing head count. There's got to be a sensible financial plan to accompany a realistic business plan. I don't know how anybody crafts a realistic business plan and what assumptions you base it on at the moment."

Aviation economist Joachim Vermooten said if SAA wants to start in a "profitable and sustainable way", it has to break with the past. This could mean being an international carrier and leaving domestic and regional routes to others.

SAA's business-rescue practitioners said they will deliver a final plan to creditors tomorrow after receiving feedback (of which they would not provide details ) from unions, the government, creditors and funders.

While the draft plan has no details of suggested routes for the new airlines, Vermooten said the government may have a legitimate argument as far as "intercontinental connectivity is concerned".

"It does not have to be on the same pre-Covid-19 scale, so I agree with the previous views of the business-rescue practitioners that international activity should be cut back to five or six routes to be operated as a focused entity. Successful government-owned airlines are primarily operating intercontinental services."

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