Flag carrier South African Airways (SAA) has secured R10.5bn ($650m) in bailout funding in the country’s mid-term budget.

The working capital injection will allow for the finalisation of the business rescue plan (BRP) and restructuring of the airline, as well as the formation of the new airline.

Welcoming the decision, the Department of Public Enterprises (DPE) said the BRP has been concluded in line with section 151 of the Companies’ Act.

It recommends the payment of an R600m compromise dividend to the company’s concurrent creditors over a three-year period.

It also includes around R1.7bn payable to aircraft lessors over a three-year period.

The post-commencement creditors will be paid directly out of the working capital injection to facilitate the restart of the airline.

The DPE noted that the airline would have been liquidated if the funds were not allocated.

The department is working on the formation of a new airline in the first half of next year. It will partner with the private sector in the launch and management of the new airline.

In a statement, DPE said: “The ministry believes that the completion of the business rescue process is the only viable alternative to a viable and sustainable national carrier – one which supports job preservation and the ability to bring the airline back from the brink to a position where employees, suppliers, and business partners can continue to contribute to the South African economy and its integration into the global economy.”

Last month, flag carrier Ethiopian Airlines chief executive officer Tewolde Gebremariam said the company is in rescue discussions regarding SAA.