UPDATE 2-South Africa agrees to new airline bailouts, document shows

* SAA entered bankruptcy protection in December

* Administrators to publish rescue plan soon

* Main opposition party makes public draft plan

* Shows government agrees to more bailouts (Adds detail, context throughout)

By Alexander Winning

JOHANNESBURG, June 1 (Reuters) – The South African government has agreed to more bailouts for South African Airways (SAA), reversing its previous stance, a draft rescue plan showed, with the airline’s administrators saying 4.6 billion rand ($263.44 million) of new money could be needed.

After almost a decade of losses, state-owned SAA entered business rescue – a local form of bankruptcy protection – in December.

Its fortunes deteriorated when the COVID-19 pandemic forced it to halt all commercial passenger flights in March, and in April the government said it would not provide further funding for rescue efforts.

But a draft business rescue plan for the airline, made public by the biggest opposition party the Democratic Alliance, showed the government had changed its stance by agreeing to fund a proposed restructuring.

A spokeswoman for the administrators confirmed the document was genuine, but said: “It is for discussion purposes only, and we await comment from the affected persons.”

A spokesman for the Department of Public Enterprises could not immediately comment.

The draft, seen by Reuters, said the government had agreed to make a working capital injection, of which the administrators estimated at least 2 billion rand would be needed, and fund employee layoffs, which could cost up to 2 billion rand.

The government would also make an allocation of at least 600 million rand towards repaying some creditors.

That is on top of 16.4 billion rand the government set aside in February to repay SAA’s guaranteed debt and cover debt-service costs.

The draft plan proposed halving the airline’s staff to around 2,500 and also halving its number of aircraft to around 20 in the coming years.

The administrators said that prior to COVID-19, they had been speaking to three parties potentially interested in partnering with SAA as a strategic equity partner or by forming an alliance agreement.

“All these engagements took place pre-COVID-19, and would be revived once the aviation industry is back on its feet,” they were quoted in the plan as saying.

SAA has received more than 20 billion rand in bailouts in the last three years, stretching public finances at a time of weak economic growth.

A draft rescue plan from early May showed the administrators then recommended winding down the airline in the absence of additional government funding.

But officials have since stepped up pressure on the administrators to come up with a plan to salvage SAA.

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