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South Africa's treasury plans $760 million bailout for state airline

South Africa

South Africa plans to table a special appropriation bill to parliament in the next month to request a 10 billion rand ($762 million) bailout for the struggling state airline, treasury’s top official said on Wednesday.

South African Airways, which runs one of Africa’s biggest unprofitable fleets, is seeking a 13 billion rand bailout from government to pay off debts and keep its planes in the air.

The Airline also plan to fly 23 percent fewer flights by the end of the year as it retires five aircraft, a part of a revamp aimed at returning to profit.

South African Airways received state funds in July to help it repay debts and also depends on government debt guarantees of about 20 billion rand ($1.5 billion).

Acting chief executive Musa Zwane said the impact of the reduced flights would mostly be felt among domestic passengers although regional and international routes will also be affected.

“One narrow-body aircraft has left the fleet, with four more expected to leave the fleet by December 2017,” he told a parliamentary committee.

As part of its turnaround strategy, he said the airline was making good progress in bringing down operation and aircraft maintenance costs.

However, liquidity constraints and exposure to volatile currency exchange rates remained a challenge, he said.

“So far there is a positive contribution by the initiatives that we have started, and we are on the right footing,” he said.

The Treasury last month appointed Vodacom Group executive Vuyani Jarana as SAA chief executive. He is the first permanent leader at SAA for two years. It was not clear when Jarana will take up his new role.

South Africa’s cabinet is considering selling its stake in landline provider Telkom, where government holds a 39 percent stake, to help raise 10 billion rand to cover a large part of SAA’s total 13 billion rand bailout.

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