Ethiopian Airlines is open to the idea of investing in South African Airways. In fact, it sees it as part of a broader strategy to save aviation in Africa.
Not only has South African Airways (SAA) not reported profit since 2011, it is not reporting anything this year…as it scrambles raise cash, it has delayed the expected release of its 2018-19 financials. Analysts fear even wider losses than expected. Could Ethiopian Airlines come to the rescue?
Tewolde Gebre Mariam, Ethiopian’s CEO, told Bloomberg:
We are interested in supporting South African Airways.
He later added that if the South African government authorized a sale of the state-owned airline, “We would consider” a stake in it.
A Chance To Save Aviation In Africa
With Gulf Carriers commanding increased market share, Tewolde sees part of his mission as saving African commercial aviation at large. Noting that African carriers collectively accounted for 60% of African market share two decades ago but now only account for 20%, Tewolde added:
It’s a continuous decline. If it is not addressed by African carriers — it may become zero. If that happens it means we are all wiped out.
I don’t quite follow the logic, though. Wouldn’t the elimination of South African Airways help solidify Ethiopian’s position as Africa’s #1 carrier?
Discussions have been ongoing since May, though stopped when former SAA CEO Vuyani Jarana resigned. South African Airways needs 2BN rand (about $132MN) to fund debt through March 2020.
If a bailout investment comes to fruition, I have a beautiful bridge in Brooklyn that I’d also invite Ethiopian to invest in c/o myself…
I say that jokingly, but quite seriously I don’t see how a cash infusion at South African Airways will lift the carrier toward a sustainable model of business. The debt service is staggering and will easily erode any increases in efficiency or modest fare increases. The government has backed SAA’s debt, so a simple bankruptcy won’t solve the problem. Indeed, there may be no solution at all for South African Airways.
image: South African Airways