SAA bailout could lead to ratings downgrade

The recent transfer of additional funds from Treasury to the SAA could lead to a ratings downgrade for South Africa, according to the Sunday Times.

This week’s R3-billion bailout will prevent the airline from defaulting on its loan to CitiBank, but economists said the transfer could lead to toxic conditions – which may result in another ratings downgrade.

The new funds mean SAA will have received R5.2 billion from Treasury in the last two months to prevent it from defaulting on loans.

“It is very loose fiscal management because you cannot pay money under any circumstances to an organisation that has got no credible board, no credible business strategy,” said Pan African Investment and Research Services CEO Iraj Abedian.

“The bigger risk is that when the National Treasury next time sits across the room from Moody’s and from other rating agencies they have absolutely nothing to defend, they are destroying their own credibility and setting up the country to be downgraded.”

SAA recently cut a number of flights across Africa in an effort to improve operations and become profitable.

The airline also reduced the number of flights between cities in South Africa.

Now read: SAA to cut flights to Cape Town, Port Elizabeth, and East London

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SAA bailout could lead to ratings downgrade