Proudly sponsored by

Ethiopian Airlines in talks with SA flag carrier on rescue

One of four ‘promising’ proposals, while Emirates and SAA are in discussions about their codeshare partnership.
If a deal is reached, much of the funding is likely to come from private financial backers rather than Ethiopian. Image: Bloomberg

Ethiopian Airlines Group is among companies in talks with South Africa’s government about potentially offering support to the country’s insolvent state airline, according to people familiar with the matter.

Africa’s biggest carrier is considering ways to help bankrupt South African Airways fly again after more than five months of dormancy, said the people, who asked not to be identified as the talks are private. Taking a stake in the carrier is one of the options under discussion, they said, though negotiations are ongoing and an agreement may not be reached.

South Africa needs to raise more than R10 billion ($595 million) to revive SAA, according to a rescue plan compiled by administrators and backed by both the state and labour groups. Yet Finance Minister Tito Mboweni has said the funds should come from private sources, committing only to help “mobilise” the required amount. SAA was placed under administrative protection in December, before the coronavirus crisis hit.

Much of the funding is likely to come from private financial backers rather than Ethiopian, which would bring more operational expertise to the table, the people said.

Ethiopian CEO Tewolde GebreMariam said talks have taken place in the past but were put on hold. He referred questions about the current situation to Abel Alemu, the airline’s regional manager for southern Africa, who didn’t immediately comment.

A spokeswoman for SAA’s administrators declined to comment.

The Department of Public Enterprises said last month it has received as many as 10 expressions of interest from “private-sector funders, private-equity investors and partners.” Those relate to the main airline and its subsidiaries, namely low-cost carrier Mango, catering arm Air Chefs and maintenance unit SAA Technical.

As many as four of the proposals are promising, the DPE’s director general, Kgathatso Tlhakudi, said in an interview. The DPE declined to comment.

As well as Ethiopian, there has been engagement between the government and Gulf giant Emirates about its codeshare agreement with SAA.

“Emirates can confirm that it has been in touch with South African Airways for general discussions relating to the codeshare partnership between both airlines,” a spokesperson said.

SAA has lost money for almost a decade, relying on bailouts and debt guarantees from the government. It was forced to ground all commercial passenger flights in March when South Africa closed its borders to contain the pandemic.

International travel remains banned from South Africa for leisure purposes, though domestic flights were recently given the green light as part of a wider economic reopening.

Tewolde said last year the state-owned carrier would be interested in buying a stake in SAA if approached, though that company has also since battled its own severe revenue shortfall due to Covid-19 travel bans.

SAA’s need for R10 billion includes R2.8 billion to get planes flying again and R2.2 billion for voluntary severance packages to cut the workforce to 1,000 employees from about 4,800. About R3 billion is needed for ticket refunds and R1.7 billion for plane-leasing companies.

© 2020 Bloomberg

COMMENTS   17

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in and an Insider Gold subscriber to comment.

SUBSCRIBE NOW SIGN IN

This is such a sad day to see how our SAA, which was once the flagship carrier in Africa now possibly being rescued by Ethiopian Airlines. Oh the irony of it all.
The ANC can bow their heads in shame to see how our once mighty country has been reduced to squalor and rubble – all in the time frame of 26 years.
I wonder what the 26 years will look like in SA Inc when the old toothfairy quote – Blame Apartheid – falls flat.

Nothing sad about seeing this shambolic airline fold. Have had the pleasure of flying Ethiopean- professional, good service, cost effective and reliable….plus the airhostessess are way more “presentable”. Sometimes SAA cant put lipstick on a pig.

I am sceptical that any airline will “invest” money into SAA, even government guaranteed and particularly if the ANC insists on retaining control, let alone cost rocketing “BEE” and AA. I also suspect that, even well run, trying to be profitable based on the tip of Africa is going to be hard. Ethiopian have an advantage I perceive in that the cost of their personnel is 50% or 60% of most/all first world airlines. Well managed but some questions around their technical abilities I think.

My bet is still on some version of Motsepe (Chancellor House) Aerospace (sic) backed with PIC or SA pension money, still a parking place for looting ANC cadres. ka-ching.

If an Ethiopian deal goes through, it will be fitting to REMOVE the SA flag livery on the vertical tail rudder.

And removing the words “South African” on the fuselage.

….and replace our aircraft “ZS-” register numbers, with “ET-” numbers.

In order to show our ANC supporters the end effect of 26-years of responsible & efficient management of state resources…

How humiliating. The once proud S A A now courting suitors to cover their shame.

No word though on prosecuting those responsible for this malaise.

I will refuse to fly on SAA no matter who has taken it over, as it represents the epitome of corruption and arrogance of governing party.

The people of SA and business should do what Nelson Mandela said,
“If the ANC does to you what the Apartheid government did to you, then you must do to the ANC what you did to the Apartheid government.”

Ethiopian Airlines earned an operating profit of US$260 million for the fiscal year 2018-2019 that ended in June 2019. How can they make a profit but South Africa with the most educated population on the African continent can’t?

Ethiopians are good at running spaza shops too. Locals not.

Must be something in the air??

The Ethiopians have more something between the ears.

SAA desperately needs operational expertise and one could argue a serious rebranding would do it wonders, no matter how politically unacceptable that might be.

Ethiopian is a great airline, with new aircraft and a new bustling hub in Addis. They are a younger, smaller but rapidly growing African version of Emirates. Their connections from West Africa are unmatched by anyone. Recent forays into the Mozambique domestic market alongside LAM bode well. South Africa would do well to make this work.

The question will be – will they make the much needed concessions and the absolutely essential relinquishing of the control necessary for someone like Ethiopian to make a success of old SAA.

It would be unique experience, flying around RSA – with your main choice being branded BAA or a branded Ethiopian airline, but certainly better for the country and the flying public.

Ethiopian run a lean no-nonsense business model and they don’t pay exceptionally well. My guess is that this won’t fly with Loot-only House and the unions.

SA does not need SAA. Other airlines would fill the void – & probably efficiently. Maybe SSA Technical is worth saving – or selling to service aircraft here.

What is this factor that enables one African nation to humiliate another African nation by buying out its flagship airline, the once-proud and outstanding national carrier?

The nation that does the buying is moving away from socialism, in the direction of a market economy, and is privatising state-owned enterprises. The buyer is moving towards law and order and embracing property rights. The seller, who ran out of alternatives, is moving away from a market economy, away from property rights, away from law and order, towards socialism and is still refusing to privatise state-owned enterprises.

South Africa is forced to sell the crown jewels, the family silver because socialism has bankrupted the state. They will sell the harbours, the airports, the resources and eventually they will sell their souls to the highest bidder because they are collectivists. They will become beggars in their own country.

Pity that Emirates is only after code share. Would be nice to have a shareholder with infinite pockets. They moved smartly to fill the gaps when Zuma’s girlfriend decided to cut Cape Town from its direct roster. Before Covid there were three flights a day to Dubai. (not counting the private jets with loot)

Emirates actually had 4 flights a day into JNB prior to lockdown – excluding Cape Town and Durban. Quite evenly spaced from arrival 05h30 in the morning to 08h40 at night. World class carrier with forward thinking and a young fleet of cost-effcetive aircraft.
Ethiopian is also state-owned but chose to follow a financial rather than political model – govt does not really interfere with the business model.
ET also capitalised their fleet and has the youngest and most modern fleet in Africa. They have maintained the discipline throughout their Capex programs and have not bowed to govt pressure. They therefore make rational and informed decisions.
Kenya Airways is a smaller but well-operated regional carrier with links to the Air-France / KLM network.
If our ill-informed and greedy management in govt had taken note of what other successful airlines have done instead of feasting off our national assets we would have had a well-run and probably profitable carrier.

I wonder if Ethiopia also has tips for the ANC on how to govern? They probably do because it surely cannot get any worse than the ANC.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Podcasts

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.
INSIDER SUBSCRIPTION APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING

Follow us:

Search Articles:
Click a Company: