Government defends SAA bailout as it seeks partners

South Africa’s National Treasury has defended a controversial R10.5 billion ($641 million) lifeline for its bankrupt national airline, saying that setting it on the path to recovery will entice private shareholders.

“Government is not going to want to hold on to South African Airways at all costs,” Treasury director-general Dondo Mogajane said in an interview after the bailout was announced on Wednesday. “If that means giving up the majority shareholding, that will happen.”

While the airline hasn’t made a profit for almost a decade and has long relied on state support to fly planes, administrators appointed late last year have a produced a viable rescue plan, Mogajane said.

If it can be implemented, as many as five potential strategic-equity partners are waiting in the wings, he said, without naming them.

“Most of them are saying fix the old, pay off the debt – and then we will come on,” Mogajane said.

The claim that a number of private investors are queuing up to take responsibility for SAA is a familiar one, having been made repeatedly this year by public enterprises minister Pravin Gordhan and his department, the most vocal supporters of the airline’s rescue.

Yet so far, the only potential backer to officially come forward has been Ethiopian Airlines Group, Africa’s biggest carrier, which made clear it was interested in an operational role rather than providing cash. Airlines around the world are battling their own crises due a a slump in demand for air travel amid the coronavirus pandemic, and the emphasis has been firmly on cutbacks rather than expansion.

SAA is too important for the local aviation market to fail, said Mogajane. The cash will be used for worker-severance packages and ticket refunds as well as basic startup costs, according to the rescue plan published in June, and come from government departments including education, police and health.

SAA hasn’t flown a commercial flight since its planes were grounded to contain the coronavirus in March, and travel restrictions remain in place to several key destinations to prevent a resurgence in infections.


Read: SAA gets R10.5 billion to keep flying

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Government defends SAA bailout as it seeks partners