A NOTE FROM THE EDITOR:

Guy Leitch.

THE SOUTH AFRICAN GOVERNMENT is pushing ahead with its part privatisation of SAA to “a Strategic Equity Partner”. The Takatso Consortium will own 51% of the airline and the Department of Public Enterprises 49%. The intention is to list the airline on the stock market as, “one way of addressing future funding requirements and to enable all South Africans to take part in its success.”

Implausibly, when Public Enterprises Minister Pravin Gordhan announced the proposed deal in June 2021, he said the idea was for government to retain a “golden share” in SAA to ensure it remains domiciled in the country and transformation goals are prioritised. How these developmental objectives will be reconciled with the need for a profitable bottom line have not been discussed.

Nonetheless the deal proceeds – albeit slowly. A due diligence was performed and on 29 November 2021 it was announced as being substantially complete and no material issues had been identified. Pravin Gordhan said that government expects to conclude the Takatso deal early in 2022, adding that there were “a few more regulatory hoops to jump through”

‘it was unlikely SAA would resume operating international routes this year’.

In the meanwhile, SAA restarted flying in April 2021 and in February 2022 announced that it had operated more than 1000 flights. The airline is not saying what its load factors and yields are, but an informal survey indicates that they are at or near breakeven and that these key parameters are being closely watched and where necessary unprofitable flights have been cancelled or combined.

SAA Interim CEO Thomas Kgokolo.

SAA Interim CEO Thomas Kgokolo assures us that the airline is “tracking against forecasts positively That was, until the onset of the Omicron variant. It negatively impacted our estimates for December overall. Our domestic load factor was slightly behind forecast, but this was offset by stronger-than-forecast regional loads. Airline margins are always thin, but our revenue per available seat kilometre trended comfortably ahead of the forecast until November, turning negative in December as the network was hit with the dual impact of Omicron-induced cancellations and a marked slowdown in higher yield late bookings.”

He went on to say that it was unlikely SAA would resume operating international routes this year but will be “in a year’s time or so.”

The airline is still far from an optimal size and is operating a small fraction of its pre- Covid route network. Further, its fleet is mismatched for its current routes and still contains inefficient and aging Airbus A340s. It is therefore suspected that the airline is operating cash negative, and this was confirmed when in late February 2022 Minister Gordhan announced that the airline would receive an additional R3.5 billion from the state. However, he is insistent this does not constitute a new bailout, claiming that payment is the balance of R14bn the government had already agreed to in order to settle the airline’s debts and bankroll its restructuring costs before Takatso takes over and assumes operational responsibility.

Only time will tell whether this is indeed the final bailout for SAA.

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