Competitors eye SAA’s most valuable assets

South African Airways. Photograph South African Airways/Sonja Grunbauer. Source: SAA Museum Society Archives
South African Airways. Photograph South African Airways/Sonja Grunbauer. Source: SAA Museum Society Archives

With a selloff on the cards, airlines are keen to claim their stake in subsidiaries Mango and SAA Technical.

While SAA is locked in a desperate fight for survival, its competitors are beginning to eye the juiciest part of the SAA group – its low-cost subsidiary, Mango.

Safair and SA Airlink have both confirmed to City Press’ sister publication, Rapport, that they conveyed their interest to SAA’s business rescue practitioners, and Comair has said that it is “open to any opportunity”.

According to aviation experts, Mango is the most valuable of all SAA’s assets.

The sale of the asset could make a lot of sense to SAA, as long as it can get past the Competition Commission, they say.

We contacted the business rescue practitioners to convey our interest should any of SAA’s assets be put up for sale
Safair spokesperson Kirby Gordon

The successful suitor will likely become the dominant player in the domestic airline market.

Safair, a long-established airline company, has also been running the low-cost airline FlySafair since 2014.

“We contacted the business rescue practitioners to convey our interest should any of SAA’s assets be put up for sale,” said Kirby Gordon, spokesperson for Safair.

According to Gordon, Safair’s real interest is in Mango.

Kgathatso Tlhakudi, the acting director-general of public enterprises, confirmed that FlySafair had approached him about Mango.

“I can confirm that we were informed, in writing. We referred the company to the business rescue practitioners because the airline is currently under their stewardship while the business rescue proceedings are ongoing.”

According to Rodger Foster, CEO and managing director of SA Airlink, the airline is also engaged in discussions with the business rescue practitioners “about the sale of certain SAA assets, which include Mango or a stake in it”.

Foster added that it was still too early to tell if anything would come of these talks.

The JSE-listed Comair, which manages a full-cost airline under the British Airways brand as well as a low-cost airline,, has not specifically discussed the sale of Mango with the business rescue practitioners.

However, Comair is part of the creditors’ committee and is “open to any opportunity”, said Susan van der Ryst, Comair’s head of corporate communications.

SAA owes Comair compensation amounting to hundreds of millions of rands as a result of earlier, uncompetitive behaviour on the national carrier’s part.

Airline will pay salaries

Despite cash flow problems, SAA’s employees will receive their January salaries, personnel were informed on Friday.

The airline’s business rescue practitioners informed City Press’ sister publication Rapport that SAA had put various measures in place to ensure that cash flow was secured.

“As a consequence, we have enough money to pay salaries,” they said.

SAA last week cancelled scores of domestic and international flights to manage its cash flow, necessitated by the fact that government still had not made a promised R2 billion lifeline available.

In an internal letter, SAA acting human resources manager Martin Kemp said personnel would receive “100% of their January salary”. Regional and international employees’ salaries would be paid on the agreed dates.

Earlier this month business rescue practitioners could not guarantee that salaries for January would be paid and indicated only that payment was subject to the availability of financing. It is understood that this was a reference to the R2 billion lifeline. 

– Liesl Peyper

Business rescue practitioners were unwilling to confirm whether the airline had been approached by prospective buyers, nor would they say whether the sale of Mango was being considered.

Joachim Vermooten, a transport economist, said the most successful model for state-owned airlines was a small, international service. He said the best way forward for SAA would be to retain only five or six international routes and to sell off its other affiliates.

Among these affiliates, Mango and SAA Technical are likely to attract the most interest, although it is impossible to know what their respective financial situations are. (SAA last published financial statements in 2017 and has always been secretive about Mango’s numbers.)

SAA has already transferred various of its domestic routes to Mango. Accordingly, Mango’s fleet has grown from four aircraft to 15. It is now a large airline in its own right, said Vermooten.

Mango has always been managed relatively independently from SAA, and another option would be to list the low-cost airline, he said. “A purely domestic airline has no strategic value for a state, so why would the state compete with private companies in this market?”

Instead of trying to buy a market share, Mango’s competitors could also follow a strategy where they simply wait, in the hope that Mango will eventually disappear and that they will then be able to cash in on its market share, said Vermooten.

Derek Mans, trade union Solidarity’s organiser in the aviation industry, said Mango was one of SAA’s most valuable assets. He said Mango’s business plan was strong enough for it to survive on its own and that Solidarity would support the sale of the airline to private investors.

Although Solidarity would not be opposed to a takeover by one of Mango’s competitors, Mans warned that the competition might well have thrown a spanner in the works, as it did when it prevented the merger of Safair and SA Airlink in 2018.

Mango’s fate could have a significant effect on the domestic aviation landscape.

Vermooten estimates that the domestic market, including low- and full-cost airlines, is currently divided as follows:

• Mango: 20%

• SAA: 10%

• SA Express: 6%

• SA Airlink: 7%

• Kulula: 20%

• British Airways: 17%

• FlySafair: 20%

In respect of the low-cost market, Mango, Kulula and FlySafair have a more or less equal stake in the market.

Any competitor that acquires Mango could therefore become the market leader.

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