At long last, there is light at the end of the tunnel for South African Airways, the beleaguered flag carrier of South Africa. The South African government has announced plans to sell a majority stake of the troubled airline to a private African investment consortium while still maintaining minority control of the airline.
South African Airways Sold To Private Investment Group
The South African government will sell a 51% stake of South African Airways (SAA) to Takatso consortium. In exchange, Takatso has committed to spending 3 billion rand ($221 million) to breathe new life into the struggling airline. While the COVID-19 pandemic initially and ironically seemed like an opportunity for SAA to rebound with fewer competitive pressures, it nearly served as the final nail in the coffin.
Since September 2020, SAA has not operated, citing a lack of funding. Furthermore, the airline has sold or returned much of its fleet, including its pair of new Airbus A350s.
The South African government has poured billions of rand into the perennially troubled airline, including a fresh 7.8 billion rand ($574 million). Public Enterprises Minister Pravin Gordhan, who has been the face of the movement to save SAA, noted that the days of state funding were over. He also stated:
“The objective of bringing in an equity partner to SAA is to augment it with the required technical, financial and operational expertise to ensure a sustainable, agile and viable South African airline.”
The Takatso consortium includes:
- Aan-African investor group Harith Global Partners
- Aviation group Global Aviation
Tshepo Mahloele of Takatso told Reuters the $221 million initial investment will operate the airline for “12 to 36 months.”
I’d say that two year spread is a bit optimistic…
Even with the latest infusion of cash from both the government and Takatso, the future is uncertain for many divisions of the former SAA. Gordhan indicated three potential subsidiaries might not survive:
- Air Chefs
- SAA Technical
- Mango, SAA’s low-cost budget carrier subsidiary
Will International Service Return On SAA?
Under the new ownership, SAA will re-launch under a three-step plan:
- Domestic service
- Regional service
- International long-haul service
Long haul routes, traditionally huge loss leaders for SAA, would be “selected carefully.”
Takatso Chief Executive Gidon Novick noted:
“We’re going to be competing with the greatest airlines in the world, and we need to be mindful of that.”
A new route network has not been revealed, but I would expect a mix of domestic flights and international flights only touching the southern half of Africa.
While it is wise that South African Airways is focusing on domestic and regional routes to begin, the national carrier has quite an uphill climb to viability. Entrenched attitudes and a business model that does not sound all too different than before has been proven to succeed at only one thing: burning up cash.