South Africa told to look to Ethiopia to rescue SAA

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 An airport cleaning staff member looks out to a grounded SAA aircraft on the runway at OR Tambo International Airport in Johannesburg. Picture: Alon Skuy / The Times / Gallo Images
An airport cleaning staff member looks out to a grounded SAA aircraft on the runway at OR Tambo International Airport in Johannesburg. Picture: Alon Skuy / The Times / Gallo Images

BUSINESS


South Africa should act to preserve its insolvent national airline and seek to partner the carrier with the Ethiopian Airlines Group, according to a study commissioned for the ANC legislators.

The assessment dated October 4, seen by Bloomberg, was prepared by African Aviation Services Limited.

It was presented to a group of legislators on Monday, according to an ANC official who asked not to be identified because the information isn’t public.

SAA went into administration in December and now needs more than R10 billion to restart, according to a plan produced by the carrier’s business rescuers.

After a thorough analysis, our preferred strategic equity partner for SAA is Ethiopian Airlines.
Nick Fadugba, the CEO of African Aviation

The airline hasn’t made a profit since 2011 and has been surviving on government bailouts.

“There is inherent value in an existing airline which cannot be easily replicated in a new replacement carrier,” wrote Nick Fadugba, the CEO of African Aviation and the author of the study.

“After a thorough analysis, our preferred strategic equity partner for SAA is Ethiopian Airlines.”

Ethiopian Airlines shares a similar “pan-African vision” to SAA and is Africa’s strongest carrier, Fadugba wrote.

Strong market

Fadugba declined to comment when called by Bloomberg.

Department of public enterprises spokesperson Sam Mkokeli couldn’t immediately comment and ANC spokesperson Pule Mabe didn’t answer his phone or respond to a text message seeking comment.

“South Africa has the strongest aviation market on the African continent,” Fadugba wrote, citing research that shows that five of the 10 most lucrative routes in Africa are in or from South Africa.

Without a strategic partner, all ongoing restructuring efforts being made are akin to once again rearranging the deck chairs on the Titanic.
Nick Fadugba

Three of the continent’s 10 busiest airports are in South Africa and six of the 10 busiest routes are in or from the country.

A spokesperson for Ethiopian Airlines said on Tuesday the airline has “no official report” on the study.

Ethiopian Airlines is willing to provide planes, pilots and maintenance services to SAA, but doesn’t want to assist with paying off its debts and meeting the costs of cutting its workforce, Tewolde GebreMariam, the airline’s CEO, said in an interview last week.

Read: Unions demand SAA's R10 billion

Echoing GebreMariam’s comments, Fadugba wrote that government should take over SAA’s debt and not encumber a new partner with it.

The airline is unlikely to succeed unless an investor is found, he said.

“Without a strategic partner, all ongoing restructuring efforts being made are akin to once again rearranging the deck chairs on the Titanic,” he said.


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