Tuesday, May 15, 2012

■ SOUTH AFRICA: VelvetSky in liquidation; SAA likely to get USD$750m government cash injection.

South African Airways logoSouth African Airways (SA) says it is optimistic that its request for ZAR6billion (USD$733million) from the South African Government will be granted, thereby allowing it to proceed with its planned fleet renewal as reported previously by The African Aviation Tribune.

SAA will hear if its application for funds has been successful or not this afternoon, when South African Minister of Public Enterprises Malusi Gigaba presents his budget speech to Parliament in Pretoria.

"SAA chief executive Siza Mzimela could not elaborate on SAA’s performance, citing the company’s preparation for its annual results in August.
She said SAA’s growth strategy included the replacement of the fleet of short-haul Boeing 737-800s by 2017 and the delivery of 20 new fuel-efficient Airbus A320s in the next five years.
Two A320s were delivered in January and February. For the long-haul fleet, the airline had six A330-200 aircraft delivered last year.
These six new aircraft cost R1bn each and would not be bought outright. Instead, they would be leased from Irish-based company Aircastle.
“SAA expects to finalise a major aircraft order by the end of the year to replace current non-efficient long-haul aircraft,” Mzimela confirmed."
 Read More Here [IOL BusinessReport South Africa]

The request for funds, which Mzimela has reiterated "is not a bailout but rather a capitalisation", comes despite SAA posting a profit during the 2011 Financial Year of USD$102million, something that went against the grain as fellow competitors 1Time, British Airways-Comair and its LCC wing Kulula, all took heavy knocks by posting losses and severely reduced profit margins respectively. The only real casualty thus far, has been Velvet Sky, the LCC who, after grounding itself in February citing viability problems, last week was placed under provisional liquidation.

VelvetSky logo
Last week in Pietermaritzburg, the High Court placed the former LCC under provisional liquidation, as a second application by outfit Umzamo Transport Services to be granted permission to implement a business rescue plan was rejected on the grounds it was too vague and could be used as a ruse to delay actual liquidation proceedings.

In total, Velvet Sky has debts of ZAR100million owed to various creditors, all of whom are vying for their piece of the carrier's carcass before there is nothing left.
"Velvet Sky executive officer Dhevan Pillay said that daily expenses could be met if possible foreign investors provided funds and if there was cost cutting.
Major fuel companies had decided to stop supplying fuel to Velvet Sky because bills weren't being paid and in February BP SA launched an application for provisional liquidation.
Mergan Chetty, for Umzamo, said Malawi had been interested in an association, but the death of prime minister Bingu wa Mutharika and the reshuffling of government posts had delayed discussions."
 Read More Here [BusinessReport South Africa]