South Africa close to finding investor for grounded Airline

South African Airways1 South African Airways

Sun, 2 May 2021 Source: bloomberg.com

South Africa is in the final stage of negotiations with a potential investor for its grounded flag carrier, a move that would give the airline a boost just as it emerges from bankruptcy protection.

The deal will bring capital and “much-needed technical and commercial expertise” to South African Airways, the Department of Public Enterprises said in a statement Friday. The agreement should be signed in the next few weeks, it said.

The comments indicate a significant stride forward in a search that has dragged on for several months and taken place during the worst crisis in aviation history. SAA has been grounded since South African borders were temporarily closed in March last year to contain the coronavirus, and was awarded the latest in a series of state bailouts in October.

The government didn’t disclose the identity of the potential investor, and few names have emerged since Public Enterprises Minister Pravin Gordhan started saying private entities may be the sought. Ethiopian Airlines Group, Africa’s biggest airline, has publicly expressed interest, but has stressed in the past it would be an operational partner rather than financial backer.

One barrier to a major deal is that South Africa is cut off from large swathes of the world due to travel bans to contain a coronavirus variant identified in the country last year. Global air travel more broadly remains at a fraction of pre-pandemic levels, as resurgent case numbers and the differing pace of vaccine rollouts keep governments wary.

Struggling Subsidiaries

While talks are ongoing, SAA’s interim board will develop a business plan to sustain the carrier’s operations, the DPE said. A priority will be to ensure the sustainability of its units including low-cost carrier Mango and maintenance arm SAA Technical, which are both showing signs of financial strain.

“These subsidiaries will need to be restructured and, in some instances, the case for continued existence must be assessed,” the department said.

Mango flights were briefly suspended earlier this week over the non-payment of fees to the airports operator, while SAA Technical announced plans to cut jobs that a union representative said would impact about 60% of employees.

Neither it nor Mango were included in the 10.5 billion rand ($725 million) bailout granted to SAA last year.

SAA is now “solvent and liquid,” business-rescue practitioners led by Siviwe Dongwana said while handing over the airline to the board earlier Friday. The carrier has cut almost 80% of its workforce and reduced liabilities to 2.6 billion rand from 38 billion rand after deals with creditors and lessors.

Source: bloomberg.com