SAA’s R1 billion quick-fix
South African Airways (SAA) is mulling the possibility of selling its landing slots at major international airports, including Heathrow Airport in London, which could give the entity a quick-fix funding boost of at least R1 billion.
Briefing Parliament’s Standing Committee on Public Accounts (SCOPA) on 22 October, SAA top brass and Transport Minister Barbara Creecy said that the state-owned airline is “debt-free” and will not be requesting additional funding from the government.
However, given the collapse of the controversial Takatso deal earlier this year, the non-availability of the R3 billion expected from selling off 51% of SAA has left a hole in its financial books.
While the meeting noted that the government remains open to securing an equity partner for SAA funding, which “would assist in ensuring the ability of the airline to continue as a going concern and help to facilitate the expansion of regional and international routes,” this has proven an uphill battle.
In an interview with the Daily Maverick earlier this year, SAA interim board chair Derek Hanekom conceded that finding potential investors will be tough because of SAA’s tainted history of corruption during the State Capture years, among others.
“We need a capital injection for [SAA] to return to [its] former glory. This could be a development finance institution, if there is interest and appetite; or another airline, if there is interest and appetite,” said Creecy at the SCOPA meeting.
“However, at the moment, we do not have any interest on the table,” she added.
Hanekom, who was also in attendance, noted that the airline has begun to recover gradually however, it has had to implement significant changes to its corporate strategy and postpone its expansion plans following the collapse of the Takatso deal, which would have injected much-needed funds.
From this, alternative funding mechanisms are now being explored for expansion.
To generate revenue for needed expansion, SAA’s management and board are contemplating selling one of its two landing slots at Heathrow Airport in London, which the airline owns.
SAA no longer operates flights to and from the UK; it leases both slots to British Airways and Qatar Airways. The lease with Qatar Airways expires in March 2025, allowing SAA to sell that slot to another airline while keeping the slot leased to British Airways.
“Even when we were flying, when we had many routes and many flights to London, we were only using one of these landing slots. The possible disposal of one of the landing slots would obviously be a useful capital injection in the enterprise,” Hanekom told SCOPA.
No final decision has been reached regarding the sale, which will require approval from Creecy, who oversees SAA’s governance since the dissolution of the Department of Public Enterprises.
Hanekom did not go into details about the valuation of SAA’s landing slot, saying only that it would be determined by a new valuation process.
“We need to test market appetite for the slot if we decide to sell it. There are early indications that other airlines are interested in buying the slot,” Hanekom told the Daily Maverick.
Speaking to Cape Talk, aviation analyst and editor of SA Flyer Guy Leitch said that these slots “were worth an awful lot,” but they are not worth as much post-Covid.
“But this revelation from SCOPA is really fascinating in terms of what it implies… I think that it is true to say that if SAA were to be selling off these slots, it would be selling off the family silver,” said Leitch.
The aviation analyst said that the airline is already “chronically short” of long-haul flights – which has allowed numerous international airlines to swoop in on these routes.
SAA currently has 16 aircraft operating on three domestic, ten regional and two international routes.
“[SAA] makes noises about using its property portfolio as collateral, and they can do that, but bear in mind that valuation of its property is about R3 billion to R5 billion, which does not even provide collateral for one aircraft,” said Leitch.
“The reality is that foreign airlines have absolutely eaten SAA’s lunch,” he added.
Meanwhile, Joachim Vermooten, an aviation economist and chartered accountant, told Travel News that, if SAA does not have any immediate plans to operate to Heathrow, it could be a good idea to sell the landing rights.
“SAA would ultimately have to decide whether it plans to operate to Heathrow again. Otherwise it could look at other airports surrounding London, possibly Gatwick.”
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