Is being placed into business rescue the way forward for SAA?
Trade union Solidarity has served court papers on South African Airways (SAA) and the ministers of finance and public enterprises, asking the Johannesburg High Court to place the embattled airline under business rescue.
The already cash-strapped airline is being further crippled by a seven-day-old strike.
But is SAA a suitable candidate for business rescue?
CapeTalk's John Maytham puts the question to Gareth Cremen, an attorney at Lawtons Africa who specialises in this field.
Cremen says one of the fundamental tests is whether a company can pay its debts as and when they fall due.
As we've seen in the media, SAA simply do not have the funds or means available and they may not have the money to pay their employees at the end of the week.Gareth Cremen, Attorney - Lawtons Africa
If one takes a step back and looks at SAA over the past several years they received a bailout in excess of R24bn.Gareth Cremen, Attorney - Lawtons Africa
Even if business rescue is found to be the right route, adds Cremen, the company would need a clear-cut plan as well as a cash injection to keep it propped up for the time being.
He singles out one major benefit of business rescue:
For the purposes of SAA where they have been locked into onerous contracts that are bleeding them dry, the (business rescue) practitioner can suspend these and/or cancel them.Gareth Cremen, Attorney - Lawtons Africa
However, under New York law as an example, anyone with claims against SAA would not be bound by the moratorium of a business rescue in South Africa.
Cremen says in a perfect world, with the right support, a business rescue could work for a company.
In the opposite scenario where there is hostility, however, this path would ultimately lead to a partial sale or liquidation.
For more on the business rescue scenario for SAA, take a listen:
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