Public enterprises to conclude deal on new SAA strategic partner next month

An announcement on SAA's strategic partner is expected next month.
An announcement on SAA's strategic partner is expected next month.
Image: Business Day

South Africans may know next month the identity of the new strategic partner for embattled SA Airways.

This is according to acting public enterprises director-general Melanchton Makobe, who was speaking during an update on the SAA business rescue process during a public enterprises portfolio committee meeting in parliament on Wednesday.

“The department is in final discussion with the SEP [strategic equity partner], the parties are conducting due diligence, which is very normal in these kinds of transactions. The process may be finalised in the next four to six weeks and once the process is finalised, an announcement on who the preferred strategic partner is will be made,” said Makobe.

The government opted to have a strategic partner as part of its new SAA after the state-owned entity went into business rescue following financial challenges.

A total of R10.5bn has been provided by the state to fund the business rescue process.

Public enterprises minister Pravin Gordhan, who was also part of the meeting, said they had made it very clear that SAA should not be expecting any further money from the government.

“So whoever the SEP is ... the SEP comes with the new cash to operate the new airline and government takes the responsibility in terms of the [R10.5bn], plus the remainder, with takes us to [R14bn], to clean up, in inverted commas, the airline and the historic cost of the airline. So that's the grand bargain, if you like, that we have entered into,” said Gordhan.

It is not yet clear when the new SAA will finally start flying.

Makobe said the resumption of services by SAA depended on different factors, including Covid-19 and also SAA Technical, which needs to ensure it is able to do maintenance work. 

Makobe confirmed they were, however, concerned about losing local market share.

“There are other airlines filling the gap that has been left by SAA. There are also some new entrants into the market that are trying to get market share, so it's critical that SAA resumes operations so that we don't lose the market share totally,” said Makobe.

He said FlySafair now has the majority of the market, followed by Kulula, while Mango had 16% market share.

“The board and management are ensuring that there is regulatory compliance with civil aviation regulations. This is to ensure that the safety and security requirements are adhered to. SAA is known to be a very safe airline, so it is critical that we maintain that record.

“But also the board is finalising what is called the market re-entry strategy. They have got to look at issues like pricing; they have got to look at issues like product development and route networks in terms of which routes to operate,” said Makobe.