SAA faces regulator scrutiny over proposed sale plan

South African Airways (SAA) officials will be summoned to a meeting with regulators next month to disclose details about talks with potential equity partners and give assurances that any deal won’t violate foreign-ownership laws.

Under the Air Services Licensing Act of 1990, airlines must be at least three-quarters owned by South Africans to operate a domestic service.

That would prevent international operators from buying more than a 25% stake from the government, unless the rules are changed.

“We are going to be calling SAA to next month’s meeting to share their plans,” said Mike Mabasa, chairman of the Air Services Licensing Council, which regulates domestic aviation within SA. “If they are already in conversations with strategic equity partners, we need to know what that entails.”

Finance Minister Tito Mboweni said last month the government is talking with potential investors in SAA, which is technically insolvent and reliant on bailouts and other forms of state support to survive.

The carrier last week triggered a plan to cut 944 jobs to reduce costs – leading to an ongoing strike that started on Friday.

Two labour groups on Sunday said they are consulting with workers about intensifying the strike across the aviation industry after failing to reach a deal over wage increases and job cuts at the weekend.

The National Union of Metalworkers of South Africa and the South African Cabin Crew Association argue that ending the outsourcing of services would help reduce costs.

Ethiopian Airlines Group CEO Tewolde Gebre Mariam has said the continent’s biggest airline would consider taking a stake in SAA, a partner in the Star Alliance.

Virgin Atlantic Airways founder Richard Branson has also indicated an interest.

“If some tough decisions need to be made, we’ll make them,” Public Enterprises Minister Pravin Gordhan said on Thursday. He’s previously said the company will need to remove unnecessary costs to attract a viable buyer.

Tlali Tlali, SAA’s spokesman, didn’t answer calls to his mobile phone. – Bloomberg