South African govt agrees $600m bailout for national carrier

AFP, Tuesday 2 Oct 2012

The South African government will step in to rescue South African Airways, whose profits have been dropping

The South African government on Tuesday announced that it would help national carrier South African Airways with $600 million of financing over two years, in a bid to get the troubled firm back off the ground.

"Government is committed to working with SAA's management and board of directors to ensure that SAA is a viable and a financially sustainable airline," the National Treasury and Ministry of Public Enterprises said in a statement.

The airline will now have to present a strategy to turn around business and prove it remains a going concern.

The company's profits have been hit by the rising cost of fuel and reduced passenger numbers, as the result of the global financial downturn.

In 2011 the carrier reported an increase in profit from 442 million rand ($53 million) in 2010 to 782 million rand, boosted by the 2010 FIFA World Cup, but for the most part the airline has struggled to make a profit.

The announcement comes just days after the embattled state-backed carrier was plunged into crisis when its chairwoman and seven board members resigned in protest.

Cheryl Carolus announced her resignation through local media, saying that relations with the government -- the airline's sole shareholder -- had become untenable.

Carolus had objected to a delay in publishing the airline's accounts for the last year.

Speculation is rife that the firm will report a massive loss this year.

Earlier this year the airline asked for a cash injection of up to six billion rand.

While the bailout falls slightly short of that figure, it is only likely to fuel calls for the airline to be privatised.

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