Disasters piling on SAA: Now South Africa’s Airlink to sue for $47 million

February 05, 2020: South Africa’s Airlink is planning to sue South African Airways (SAA) and its business rescue practitioners (BRPs) for ZAR700 million rand ($47 million) in unpaid ticket revenue, Moneyweb has reported citing court documents. The regional carrier asserts that the lost income is putting its operations at risk.

On January 31, South African president Cyril Ramaphosa has ordered probe from special government investigators for South African Airways (SAA) that he believed to have operated corruptly dating back to at least 2002.

Airlink has been able to agree with the BRPs of SAA - Les Matuson and Siviwe Dongwana about the revenue earned from December 6, 2019, onwards and it is currently being paid daily.

SAA has been in business rescue since December last year, which protects it from litigation and enforcement of claims. Its BRPs have not responded to a formal request from Airlink to proceed to the court explained Airlink CEO Rodger Foster in court papers submitted to the Gauteng High Court in Johannesburg.

“Without this cash being paid, Airlink may not be able to continue operations in the very near future,” he said. “The airline business is a low margin one. Airlink relies on high turnover and consistent cash flows to fund its business on a month-to-month basis.”

Airlink incurred ZAR389 million ($26 million) in operating expenses in November, and as a result of SAA’s refusal to transfer due to ticket revenue, it had to use working capital reserves to fund these expenses and it also breached one of its aircraft finance agreements, informed Foster.

The BRPs disagree, as they consider the sums to be pre-commencement debt, meaning that they are classified with other amounts SAA incurred shortly before going into business rescue. These are typically put on hold while SAA is in business rescue and creditors are not allowed to enforce claims on them.

Last month, Airlink began the process of divorcing itself from SAA following the replacement of its SAA franchise agreement with a new commercial arrangement. To that end, effective June 11, 2020, it will resume operating flights under its own ‘4Z’ flight code.

On January 28, the state-owned Development Bank of Southern Africa (DBSA) has prevented the collapse of the carrier by providing it 3.5 billion rand ($239 million).

Meanwhile, Comair's management is planning to meet SAA’s Les Matuson, to discuss the more than ZAR1 billion rand ($69 million) settlement won against SAA in February 2019. The airline filed for bankruptcy protection proceedings on December 5, 2019.