"Government is committed
to working with SAA's management and board of directors to ensure that SAA is a
viable and a financially sustainable airline," the National Treasury and
Ministry of Public Enterprises said in a statement.
The bailout will take the form
of loan guarantees, providing would-be investors with the promise that the
government will stump up for any unpaid loans.
"The guarantee will enable
SAA to borrow from the financial markets, thus ensuring that the airline
continues to operate as a going concern," government officials said.
The airline will now have to
present a turnaround strategy to around business and prove it remains a going
concern.
Long financially troubled,
SAA'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 ($53 million) in 2010 to 782
million rand, boosted by the 2010 FIFA World Cup. But for the most part the
airline has struggled to make a profit.
And previous attempts at
restructuring have fallen flat.
The announcement comes just
days after the embattled state-backed carrier was plunged into crisis when its
chairwoman and seven board members resigned in protest.
Cheryl Carolus announced her
resignation through local media, saying that relations with the government --
the airline's sole shareholder -- had become untenable.
Carolus had objected to a delay
in publishing the airline's accounts for the last year.
Speculation is rife that the
firm will report a massive loss this year.
But Carolus's replacement
Vuyisile Kona on Tuesday insisted that SAA's troubles were part of an
industry-wide crisis.
"It is not just only SAA
that is experiencing problems," he told a state news service.
"The South African
government is not the only government that is supporting its airline. The
Japanese government poured billions into its bankrupt airline. We don't want to
go that route. We rather want to fine tune operations without allowing the
airline to go into bankruptcy," he said.
Earlier this year the airline
asked for a cash injection of up to six billion rand.
While the bailout falls one
billion rand short of that figure, it is only likely to fuel calls for the
airline to be privatised.
The company's annual general
meeting will take place on 15 October.
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