Government in talks with Canadian firm over SAA – report

South Africa is looking to raise about $400 million from the sale of a stake in its bankrupt national airline, according to people familiar with the situation, a plan likely to lower the chances of finding a partner to aid its revival.

The funds would be used to re-capitalize the reformed South African Airways, the people said, asking not to be identified because the information hasn’t been made public. The government is banking on SAA attracting interest because it holds some lucrative routes and valuable landing slots, such as at London’s Heathrow Airport, they said

The Treasury referred questions to the Department of Public Enterprises, which didn’t respond to requests for comment.

South Africa’s search for a buyer of equity in SAA comes at a time when the aviation industry is mired in the biggest crisis in its history, having been laid low by the Covid-19 pandemic. Although Ethiopian Airlines Group has said it would consider a deal for SAA, chief executive officer Tewolde GebreMariam has made clear he’s not interested in investing capital.

Ethiopian is still interested in SAA “but the process is slow as it is complex,” the CEO said in a response to queries last week. The department is in talks with Fairfax Africa about a stake in the airline, the Financial Mail reports, without saying how it got the information.

Revival Plan

SAA has been unprofitable for almost a decade, surviving on state bailouts and government debt guarantees, and was placed under administration a year ago. The carrier has been lying dormant since March, when the fleet was grounded due to travel bans to contain the coronavirus.

South African Finance Minister Tito Mboweni agreed in October to fund a revival plan that includes firing almost 80% of SAA’s workforce, a sum calculated by the administrators as about 10.5 billion rand ($685 million). The outlay, yet to be delivered, is intended to get SAA flying again.

“You won’t get a meeting of minds, as no other airline will want to put in money to subsidize SAA,” said Joachim Vermooten, an independent aviation analyst in South Africa when asked if SAA could attract direct funding. “The current plans very clearly demonstrate that it’s not a viable proposition.”

The country’s largest banks are nearing agreement to provide about half of the initial amount needed, the people said. London-based Barclays Plc may provide some of the balance in support of a government injection of about 2 billion rand, the people said.

Securing funding could take pressure off the government, which is facing a fiscal crisis should it fail to contain surging debt. The National Treasury had said the cash for the revival plan would be diverted from other state budgets including health and education.

Representatives of South Africa’s biggest lenders and Barclays declined to comment, as did SAA’s administrators.

Read: Why South Africa still needs SAA: Mabuza

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Government in talks with Canadian firm over SAA – report