Government says it has received more than 10 offers to buy SAA – but there are serious conditions attached

The South African government has received more unsolicited interests from private sector funders, investors and partners for a future restructured South African Airways (SAA) and its subsidiaries.

The Department of Public Enterprises (DPE) said that as of the end of August it had received more than 10 unsolicited interests for SAA and its subsidiaries Air Chefs, South African Airways Technical and Mango Airlines.

“As the sole shareholder on behalf of government, the DPE had been busy assessing the interests from the several unsolicited local and international Strategic Equity Partners (SEPs) as part of the implementation of the Business Rescue Plan, which was published at the end of June 2020,” it said.

The DPE said that such investments in the airline and its subsidiaries will help support key economic sectors, including tourism and solidify South Africa as an African gateway to international markets.

“Such partnerships will also improve scale and scope and ensure continuity of value creation to the South African economy and long-term sustainability of the aviation industry managed by competent, competitive and skilled personnel who possess strategic and technical capabilities, which are critical to the success of the new carrier.”

In addition to maintaining a certain level of presence in the ownership of the new carrier, government said it would like to see a number of characteristics in the new airline.

These include:

  • An efficient and modern aircraft fleet with hybrid density options acquired at competitive rates resulting in cost efficiency;
  • An offering with the right routes, at the right times and at competitive prices;
  • A network structure that allows for connectivity at hubs, whilst maintaining elevated aircraft utilisation;
  • Connecting Africa to world economic hubs whilst  maintaining diplomatic connectivity;
  • A right-sized and motivated workforce;
  • A customer-centric airline designed to be lean, technology savvy, digitally native and agile to service all market segments;
  • Appointment of a smaller, effective, reinforced, and empowered Board of Directors; and
  • A centralised, single commercial team-leading fleet, network, pricing, revenue management, product, services, loyalty programme, sales, and marketing for the new airline.

New airline could launch in January 

South Africa’s new national airline could launch as early as January 2021, the Sunday Times reported.

The government is working with private sector investors for a restructured South African Airways (SAA) – and has received “more than 10 unsolicited offers” to partner with the airline, the paper said.

These interested investors are also exploring potential integrations of SAA and its subsidiaries, including SAA Technical and Mango.

Bloomberg reported this week, that the government has started talks with private entities interested in buying SAA, which needs at least R10 billion to resume operations.

A team from the Department of Public Enterprises and advisers from Rand Merchant Bank began negotiations after receiving four promising proposals regarding SAA, according to Kgathatso Tlhakudi, the Department of Public Enterprises’ (DPE) director general.

The state ideally wants SAA to resume operations by the year-end, he said in an interview on Wednesday, although much will depend on a pick up in demand amid the Covid-19 pandemic and a successful fundraising, Bloomberg said.

Transformation and pilots

One issue, which was not addressed by the DPE, is the issue of transformation at the new airline.

In May, parliament’s portfolio committee for Transport raised concerns about the lack of transformation in South Africa’s aviation sector.

Responding to annual presentations by the Airports Company of South Africa (Acsa) and the South African Civil Aviation Authority (SACAA), members of the committee noted with concern that the majority of pilots and cabin crew are white.

Data provided by the Civil Aviation Authority shows that the vast majority of pilots in the country are white (89.2%). By comparison, just 7.1% of pilots are black South Africans, while coloured and Indian pilots make up a combined 3%.

To address this, media reports have indicated equal employment will be more important than seniority for determining which pilots will be retained at the new SAA.

According to the Rapport, this proposal was contained in a notification sent by SAA’s business rescue practitioners (BRPs) Les Matuson and Siviwe Dongwana to unions representing the airline’s employees.

As part of the restructuring, SAA’s current complement of 625 pilots will be slashed to 88. More than R1 billion of the R2.2 billion set aside for voluntary severance packages will go to these retrenched pilots.

Those who are retained will earn an annual salary of between R950,000 and R2.1 million, with a a 20% premium included for flying certain planes.

Read: This is what the ‘new SAA’ will look like

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Government says it has received more than 10 offers to buy SAA – but there are serious conditions attached