SAA chief executive on why it’s different this time

South African Airways chief executive officer John Lamola says that the newly reformed airline will shake off government meddling,  and promises profitability.

Speaking to CNN’s Richard Quest, Lamola said that SAA’s troubles over the last two years are not unique, given the state of the global airline industry due to Covid-19 – however, he said that the new airline is emerging from the crisis with a new goal in mind.

“From where the industry is emerging now, South African Airways is not unique. During the Covid period, governments around the world have put up over $200 billion helping airlines perform their strategic role,” he said.

However, SAA is emerging from the pandemic with a restructured business, as a totally new operation, moving ahead as a public-private entity. “For the first time, it will be run by a private entity,” Lamola said.

When asked about the years of losses that necessitated costly government bailouts – as well as the widely reported interference from government officials and other politically connected persons – Lamola said that the new SAA is moving on from that.

“It’s not just about bailouts,” he said. “(In years past) the South African government has been the main shareholder – and like any other shareholder, when their investment is in trouble…the government has always come into play.”

Lamola said that the airline is a strategic asset for the government, hence its involvement. However, he stressed that the mentality has changed and that things are now “totally different”.

“(The new SAA) is now majority-owned by a non-government entity, and secondly it’s an agile, stripped-out airline with a focused strategy of unlocking the African market,” he said. Lamola said that Africa accounts for only 2% of the global airline industry and has many opportunities for a business like the new SAA.

While the government is no longer the majority shareholder in the new SAA, Bloomberg reported in May that it has retained special voting rights and will be given R3 billion in preference shares that can be redeemed through future cash flow.

That means the state stands to benefit should the new owner, the Takatso Consortium, revive a carrier that’s struggled under years of heavy losses, corruption and mismanagement, according to the Department of Public Enterprises.

Takatso – made up of a local jet-leasing company and private-equity firm – will provide R3 billion in working capital and has valued SAA’s assets at about the same amount, the department said.

The group agreed to take control of the airline almost a year ago for a notional sum of about $3, in return for spending commitments and responsibility for operations.

Details of the deal emerged after the National Treasury criticized the terms, saying SAA represents a “contingent liability” as the government may be liable for certain costs. The state will still be on the hook for outstanding “business rescue obligations” stemming from the company’s near 18-month bankruptcy proceedings, Takatso said in a separate statement.

The government’s voting rights, known as a golden share, would mean SAA can’t be sold on without its consent and the state would retain a stake of at least 33.3%, the DPE said. It would also have full voting rights over “matters of national interest”.

The country’s aviation industry meanwhile, continues to struggle to contend with the liquidation of one of its biggest domestic airlines, Comair.

Comair made up as much as 40% of domestic flights, and its closure has placed increased pressure on its competitors, like FlySafair, and partners, who are struggling to plug the gap left in the market.

Flysafair has promised to add more routes and more planes to its fleet in the coming months, to meet demand.


Read: Big travel shift expected to hit South Africa: FNB

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SAA chief executive on why it’s different this time