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South African Airways needs government loan guarantee or risks liquidation - board member

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By Reuters
South African Airways needs government loan guarantee or risks liquidation - board member
FILE PHOTO: Passengers board a South African Airways plane at the Port Elizabeth International Airport in the Eastern Cape province, South Africa, September 30, 2018. REUTERS/Siphiwe Sibeko   -   Copyright  Siphiwe Sibeko(Reuters)

JOHANNESBURG (Reuters) – South African Airways (SAA) needs a government guarantee to help it secure bank funding otherwise the carrier is at risk of entering liquidation, board member Martin Kingston said on Wednesday, as a crippling strike enters its sixth day.

The cash-strapped airline has cancelled hundreds of flights since the strike began on Friday, with the stoppage initially costing 50 million rand ($3.36 million) per day, though that figure has come down as some flights have resumed.

Speaking in an interview on news channel SABC, Kingston said that SAA’s dire financial situation meant it was in no position to increase its wage offer to striking unions, and the action was only making the state-owned airline’s position more perilous.

“At the moment, Rome is burning. We don’t have the time or the luxury to consider industrial action,” Kingston said.

“Unless we are able to secure guarantees from national treasury – and we’re in discussions with them as you and I speak – then the board will have to recommend to government that actually it be placed in liquidation,” he said.

“We need to be confident that we have the financial wherewithal to trade for the next 12 months on a solvent basis. That is not currently the case.”

The Department of Public Enterprises said on Wednesday there was no more money in public coffers for SAA, with multiple bailouts for the airline and other ailing state-run firms becoming a “moral hazard”.

Talks between SAA and the two unions that called the strike broke down on Wednesday evening, according to a spokeswoman, who said they could not accept the current wage offer and would try and escalate the action.

“For us, the strike continues,” Phakamile Hlubi-Majola, spokeswoman for the National Union of Metalworkers South Africa (NUMSA), which called the strike alongside the South African Cabin Crew Association, also told SABC.

The unions on Sunday said they would pursue a secondary strike in other airlines and organisations across the industry, to shut down the aviation sector and get SAA to meet their demands. They will hold a news briefing at 0730 GMT on Wednesday.

Kingston said it will become apparent in the next month whether SAA can trade its way out of the current situation.

(Reporting by Emma Rumney; Editing by Christopher Cushing)