SAA receives conditional guarantee to help finance fleet

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South Africa's government has handed flag-carrier South African Airways a R5 billion ($594 million) guarantee to ease the carrier's access to financial markets.

But the guarantee depends on the airline's board developing a turnaround strategy which must be approved by the ministry of finance and the department of public enterprises.

The department of pubic enterprises says the backing will enable South African Airways to borrow from financial markets, "ensuring that the airline continues to operate as a going concern".

It adds that the guarantee will remain in effect for two years, from 1 September 2012.

South African Airways must provide the ministries with the financing strategy for planned purchases of long- and short-haul aircraft to modernise its fleet.

The carrier's chief executive, Siza Mzimela, recently told Flightglobal that the airline was negotiating with Airbus to finance its order for 20 A320s, to replace Boeing 737-800s, and wanted to increase its long-haul fleet - comprising Airbus A330s and A340s - to around 30 aircraft.

Under the terms of the guarantee a technical committee, with representatives from the treasury and department of public enterprises, will monitor the airline's financial position and its progress with implementing the turnaround programme.