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While finance minister Tito Mboweni has publicly questioned the need for a national carrier, some argue that SAA is still a viable business, despite years of loss-making and hefty bailouts leeching public coffers. SAA’s debt currently stands at over R12bn and another R10.5bn has been earmarked for the carrier. The airline has been a sitting duck since March when it stopped flying due to the Covid-19 lockdown. Siviwe Dongwana, a business rescue practitioner points out that finding a partner to manage the airline will be difficult. “No strategic-equity partner wants to deal with legacy issues of SAA, nor any potential investee for that matter,” he said. – Melani Nathan
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SAA needs partner to strengthen management, administrator says
By Antony Sguazzin
(Bloomberg) — South African Airways has the potential to be a sound business but would benefit from having an industry-investment partner to improve its management, according to the bankrupt state carrier’s administrators.
“The issue with SAA has never been about the absence of a business but the management thereof,” Siviwe Dongwana, one of the business-rescue practitioners, said in written comments on Tuesday. A strategic-equity partner would help the airline become “sustainable and not require any further support from the fiscus,” he said.
The search for an aviation company to invest in SAA is at the heart of the latest plan to revive the airline, which was surviving on government support even before the onset of the Covid-19 pandemic brought a halt to all commercial flights in March. Ethiopian Airlines Group has regularly expressed interest in the company, though it is reluctant to commit financing and talks with the government have failed to lead to a deal.
SAA’s reliance on state-backed loan guarantees had enabled debt to rise sixfold to R12bn ($782mn) between 2011 and 2019, said Dongwana, who was brought in when the airline was placed in bankruptcy protection almost a year ago. That was costing the company R1.3bn in annual interest payments, he said.
At the same time, SAA has had nine permanent or acting chief executive officers over a 10-year period and was embroiled in various corruption scandals during the presidency of Jacob Zuma, which ended in 2018.
South African Finance Minister Tito Mboweni approved a bailout of about R10.5bn in his October budget statement, a move that was heavily criticized given the economic devastation brought by the coronavirus pandemic and the funding needs of the country’s crucial national power utility.
“No strategic-equity partner wants to deal with legacy issues of SAA, nor any potential investee for that matter,” Dongwana said.
Still, SAA is potentially viable, he said. “The airline has a good route network and is dominant in the African market,” he said. “SAA still has some very profitable landing slots at prime destinations, enabling it to compete with other international commercial airlines.”
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