Government seeks investor of SAA

SAA, SAX and Mango could soon
see the introduction of a private
equity partner owning up to
a 25% stake in the three airlines,
Minister of Public Enterprises Lynne
Brown announced during the recent
Airlines Association of Southern Africa
(AASA) AGA in Swakopmund.
“It will be the first time we are
looking at finding a private shareholder
for all three state-owned airlines,” the
Minister said. To find a shareholder for
the three companies, government will
need to have the airlines work closer
together. Although details on how the
airlines would be combined have not
been finalised yet, the Minister said
it could either be through a merger or
through a common holding company.
“We need to force them to work
together and, for the moment, that
isn’t so.” She said that currently
Mango was heavily reliant on SAA for
its overheads. “SAA actually carries
Mango without Mango paying benefits
to SAA.”
Greater private-sector participation
within the state-owned airlines would
also mean bringing in managerial,
technical and other support, said the
Minister. Eventually, this could mean
that the state-owned airlines would
become economically and financially
stable and start paying dividends to
government – the airlines’ largest
shareholder, she said.
The Minister said the focus for an
investor was currently on a mediumhaul
airline.
Ethiopian Airlines would be an
obvious choice, according to industry
players, as it has expressed interest
in investing into other airlines on
the continent. However, one industry
player, who preferred to remain
anonymous, said: “The three carriers
combined have a nett debt north of
R20bn. Why would Ethiopian Airlines
want to invest in that? Especially when
considering the airlines have no track
record of profitability.”
“Besides the obvious financial
benefit of a 25% stakeholder, SAA,
SAX and Mango could also greatly
benefit from the expertise of an
international airline,” said June
Crawford, Barsa ceo.
Closer collaboration between
the three airlines is bound to
be beneficial, according to Chris
Zweigenthal, AASA ceo, as it will
rationalise their operations.
However, in terms of competition,
a merger could be ‘interesting’,
says Kirby Gordon, FlySafair vp
of sales and distribution. “Mango
has previously had the mandate to
operate competitively as a stand-alone
entity without an unfair advantage
with regard to state subsidisation.
The integrity of this has never really
been confirmed. Mango has never
published financial statements and
the statement issued by SAA earlier
this year about SAA subsiding leases
on its aircraft, and later retracted, is
now the subject of an investigation
by the Competition Commission. The
concern here is that a merger could
further blur those lines.”
According to Kirby, the onus will
be on the state and the relevant
watchdogs to ensure that a level
playing field remains for all.