Is SAX’s loss Airlink’s gain?

SA EXPRESS has been
granted a further
government guarantee of
R1,1bn from Treasury to allow
the airline to continue as a
going concern, and to host an
annual general meeting before
the end of October this year.
Jabulani Sikhakhane,
spokesperson for the
National Treasury, told TNW
the guarantee was made
up of an extension of the
R539m guarantee that was
due to expire at the end
of February as well as an
additional R567m guarantee.
Jabulani says, to date, SAX
has borrowed the full R539m
against the existing guarantee.
He further explained that
Treasury had agreed to the
guarantee after SAX showed it
had revised its business case
and its financial modelling.
“Taking comfort from the
revised projections, the
Minister of Finance concurred
with the issuance of the
guarantee to SA Express.”
The R1,1bn guarantee is
subject to stringent conditions,
including regular reporting on
the progress in implementing
cost-cutting measures and
reasons for any delays in
meeting cost-cutting targets.
The airline will also need
to identify the individual
managers responsible for
delivering cost-cutting targets
and provide a fully documented
funding plan within 30 days.
Jabulani adds: “Also, the
shareholder compact must be
translated into performance
agreements for the airline’s
executive management and
be the basis for setting their
remuneration.”
SAX ceo, Inati Ntshanga,
could not be reached for
comment at the time of going
to press. Inati was quoted
in Business Day saying the
airline was working on internal
‘austerity measures’ to bring
the airline to ‘sustainable
profitability’. This included a
review of the airline’s flight
schedule.
This could bode well for SA
Airlink, as the two airlines have
been competing heavily on
certain routes over the past
few years. Rodger Foster,
Airlink ceo and and md, told
TNW that, despite the fact
that both Airlink and SAX
were separate feeder airlines
to SAA, the two performed
exactly the same function and,
as such, competed with each
other for market opportunity.
“I can’t comment on SAX
reducing or having reduced
activities on routes that
overlap with Airlink. What I
can say is that there has been
uneconomical overlapping of
franchised activities, and just
as you would not have two
franchised fast food outlets
on the same street corner, the
abuse of franchise intellectual
property by one franchisee
by encroachment on another
franchisee’s licence rights has
had to be rationalised by order
of the franchisor.”
Whereas SAX is owned by
the state, Airlink is a private
company where the state has
a minority interest of less than
three per cent held by SAA.
SAX and Airlink both have a
separate franchise relationship
agreement with SAA, the
franchisor. These separate
franchise agreements entitle
them both (SAX and Airlink)
to make use of certain SAA
franchise intellectual property,
and each airline is separately
licensed by SAA accordingly.
Airlink does not rely on the
state for any funding or any
financial underpins of any
nature.