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UPDATE 2-South African Airways has reasonable chance of rescue - specialist

Emma Rumney

* Specialists judge rescue a better option than liquidation

* Business rescue plan deadline extended until Feb. 28 2020

* SAA is deeply in debt and has been making losses since 2011

* Not clear how much of carrier, or its jobs, will remain

* (Adds no comment from SAA, unions, details, background)

JOHANNESBURG, Dec 20 (Reuters) - South African Airways (SAA) has a reasonable chance of being saved from collapse, the specialists appointed to turn around the state-run carrier said on Friday.

Les Matuson, the business rescue practitioner charged with assessing the prospects of rescuing SAA and 10,000 related jobs, and his team said rescuing SAA was the preferable option.

"The joint business rescue practitioners are of the opinion that that there is a reasonable prospect of a successful business rescue notwithstanding the inevitable risks and challenges," they said in a statement.

"(We)...are of the belief that the business rescue process will achieve a better outcome for all stakeholders than an immediate liquidation," the statement added.

A spokeswoman for SAA said she had no comment.

Earlier this month the government put SAA into business rescue - a form of bankruptcy protection where a specialist advisor takes control of a company to restructure it - after a strike exacerbated financial problems and left it at risk of going bust.

The national carrier is one of several state entities that are deeply in the red after nearly a decade of mismanagement and corruption, the most troubling of which is moribund state power company Eskom.

SAA's case was seen as a test of President Cyril Ramaphosa's resolve to carry out badly-needed economic reforms. Ramaphosa this month promised "drastic action" to turnaround cash-strapped and highly indebted state firms.

In event of liquidation of SAA, proceeds would all go to first-tier preferential creditors, leaving nothing for the others, the statement said, elaborating one argument against it.

"SAA leases most of the aircraft and accordingly in a liquidation, there will be limited assets which can be realized for distribution to creditors," it said.

NOT CLEAR OF RUNWAY YET

While the decision to attempt to salvage it is a much-needed vote of confidence in SAA - once Africa's biggest airline and a former source of patriotic pride - it is unclear what form it could take in the future and how many jobs can be saved.

The airline has not made a profit since 2011 and has received more than 20 billion rand ($1.36 billion) of government bailouts over the past three years.

Matuson said creditors had approved and extension to the deadline to present a plan for SAA's rescue until no later than the end of February next year.

Before it is finalised, employees and creditors will need vote in favour of the plan, according to business rescue law. Any cuts to jobs or wages - issues that prompted the initial strike last month - could prove sensitive.

The two main unions representing SAA workers both said they would comment later.

Some analysts had said the airline should be allowed to fail, while others questioned the affordability of a 4 billion rand lifeline stumped up by government in order to launch the rescue plan. (Writing by Tim Cocks Editing by Angus MacSwan)