South Africa should act to preserve its insolvent national airline and seek to partner the carrier with Ethiopian Airlines Group, according to a study commissioned for ruling-party lawmakers.<\/p>\n
The assessment, seen by Bloomberg, was prepared by African Aviation Services Ltd and dated Oct. 4. It was presented to a group of African National Congress lawmakers on Monday, according to an ANC official who asked not to be identified because the information isn\u2019t public.<\/p>\n
South African Airways went into administration in December and now needs more than R10 billion ($603 million) to restart, according to a plan produced by the carrier\u2019s business rescuers. The airline hasn\u2019t made a profit since 2011 and has been surviving on government bailouts.<\/p>\n
\u201cThere is inherent value in an existing airline which cannot be easily replicated in a new replacement carrier,\u201d Nick Fadugba, the CEO of African Aviation and the author of the study, wrote in the document. \u201cAfter a thorough analysis, our preferred strategic equity partner for SAA is Ethiopian Airlines.\u201d<\/p>\n
Strong Market<\/strong><\/p>\n Ethiopian Airlines shares a similar \u201cpan-African vision\u201d to SAA and is Africa\u2019s strongest carrier, Fadugba wrote.<\/p>\n Fadugba declined to comment when called by Bloomberg. Department of Public Enterprises spokesman Sam Mkokeli couldn\u2019t immediately comment and ANC spokesman Pule Mabe didn\u2019t answer his phone or respond to a text message seeking comment.<\/p>\n \u201cSouth Africa has the strongest aviation market on the African continent,\u201d Fadugba wrote, citing research that shows that five of the 10 most lucrative routes in Africa are in or from South Africa, three of the continent\u2019s 10 busiest airports are in South Africa and six of the 10 busiest routes are in or from the country.<\/p>\n Ethiopian Airlines is willing to provide planes, pilots and maintenance services to SAA, but doesn\u2019t want to assist with paying off its debts and meeting the costs of cutting its workforce, Tewolde GebreMariam, the airline\u2019s chief executive officer, said in an interview last week.<\/p>\n Echoing GebreMariam\u2019s comments, Fadugba wrote that the South African government should take over SAA\u2019s debt and not encumber a new partner with them.<\/p>\n The airline is unlikely to succeed unless an investor is found, he said.<\/p>\n \u201cWithout a strategic partner, all ongoing restructuring efforts being made are akin to once again rearranging the deck chairs on the Titanic,\u201d he said.<\/p>\n
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