The collapse of the protracted deal with private investor Takatso Consortium has impacted the airline but South African Airways (SAA) is moving ahead without the capital injection.
Over a month ago Public Enterprises Minister Pravin Gordhan announced the termination of negotiations with the Takatso Consortium, for the sale of 51 percent of the national carrier.
In a televised interview with the chairperson of SAA’s Interim Board of Directors, Derek Hanekom said that the parting of ways with Takatso was not a disappointment or a surprise.
“We knew there was a possibility that it would not go through. We, the board and management have been aware over the last few months that it wasn’t going to be an easy road getting to the point of concluding this transaction. So we were not surprised when it finally collapsed.” Hanekom said.
Derek Hanekom, Chairperson of the Interim Board of Directors, South African Airways
CERTAINTY AND STABILITY FOR AIRLINE
Ultimately, the termination of the Takatso deal will lead to more stability and direction at the airline, which is now fully in state hands.
For the last few years management at SAA has been unable to move ahead with any certainty or in a clear direction with the pending Takatso deal being dangled in front of them.
“On one hand, the capital injection we’d been planning on won’t be coming in. But on the other hand, there’s certainty. That has plagued SAA for the last couple of years, not knowing exactly where we’re going to be or what the plans of the proposed strategic equity partner would be.” Hanekom explained.
Without Takatso on board, SAA’s management will be able to make important decisions.
SMALL AND SUSTAINABLE AIRLINE
In its current form, SAA is a small and sustainable operation that does not rely on handouts from the state.
“It’s not where we want it to be but it’s growing slowly and we believe, sustainably.” Hanekom stated.
This is largely thanks to the dedicated management team that SAA has in place. However, many of these individuals have only been employed for the interim period.
SOUTH AFRICAN AIRWAYS RECRUITMENT DRIVE
Last week SAA advertised it was looking to recruit several executive management roles, one of which is for the Chief Executive Officer position.
SAA is now looking to make permanent appointments for several positions hence the recruitment drive.
“The filling of these posts is a positive and decisive step aimed at providing organisational stability and predictable direction of the growth plans and expansion plans currently being pursued,” Hanekom said.
SOUTH AFRICAN AIRWAYS FLIES SOLO
With the airline now back in state hands, further route expansion will be delayed. Hanekom said that no additional new routes would be launched for a couple of years.
“We were planning to go beyond Perth as our second intercontinental flight. We were planning to do London, Frankfurt and North America. All of that has to be suspended, or rather, delayed. So, we’re not going to go beyond Perth for the next couple of years.” Hanekom explained.
He said the airline has to be financially self-sufficient and cannot depend on taxpayer funding for route expansion.
“You can fly to places but if it’s costing the taxpayer an arm and a leg then it might not be the right thing to do. At this stage we are looking at realistic, sustainable, modest growth – which is not going to rely on taxpayers and their pockets.” He said.
FINANCIAL POSITION
Hanekom stated that the airline made a small profit for the 2022/2023 financial year and it had broken even for the current year.
SAA has made progress since emerging from a business rescue in late 2021. It will focus on growing the business it already has.
INVESTORS AND LOANS
Hanekom said that South African Airways would still seek investors but the state would remain the majority shareholder.
Unlike the Takatso deal, potential investors could only become minority shareholders.
“They’ve made it very clear that whatever investor that might come onboard, it would not be on the same terms as the Takatso deal. In other words, it will be a less than 50% shareholding. It would be a minority shareholding.” Hanekom said.
If there is no interest from investors SAA would need to approach capital markets to seek finance.
The other side of the coin is if we have to go to capital markets. We’d have to look for loan finance. If we are able to get capital from whatever source then we might be able to expand more rapidly.” He said.
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SOUTH AFRICAN AIRWAYS FLEET EXPANSION
One of the challenges for South African Airways was not having sufficient aircraft to operate scheduled flights.
It currently has 13 aircraft and operates 14 routes (domestic, regional and intercontinental).
Hanekom said that one of the factors limiting SAA’s ability to scale up was global aircraft shortages. However, he said that SAA will receive 8 additional aircraft this year.
“Today we have 13 aircraft and plan for this financial year to expand this to 21. These plans are concrete and will be executed.” He said.
