South African Airways to get gov’t bail-out, amid calls for privatization
The South Africa government on Tuesday announced that it would help national carrier South African Airways with US$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 South African Airways’s management and board of directors to ensure that South African Airways 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 carrier’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 (US$53 million) in 2010 to 782 million rand (US$ 94 million), 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.
Speculation is rife that the carrier will post a massive loss this year.
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