Consortium completes SAA due diligence

The Takatso consortium, which is set to own a majority stake of SAA, says its due diligence process at the airline is complete with no material issues identified, paving the way for purchase agreement negotiations.

The purchase agreement is likely to determine the price that the consortium will pay the government for a controlling stake in the state-owned airline.

Takatso has committed to injecting more than R3bn into SAA over the next three years.

“The agreement will be subject to various approvals and preconditions which are likely to take some time,” Takatso said.

The airline is expected to resume operations on September 26 after a year of its planes being grounded. Takatso says it has made inputs into the airline’s business rescue plan, but is not involved in the funding or plans to relaunch the carrier.

The Takatso consortium comprises Global Aviation and Harith General Partners.

The resumption of SAA’s operations will be bankrolled by the government through the R2bn committed for working capital from the funds allocated by the National Treasury last October. The new SAA, which is led by interim CEO Thomas Kgokolo, is not expected to be funded from the fiscus.

SCALED DOWN

Kgokolo says the airline will operate at a reduced level with its staff complement down to 800 from 4,500, a smaller route network and fleet and increased competition from other airlines. Support for subsidiaries Mango, SAA Technical and Airchefs will also be scaled down. A new board will be put in place once transactions between the government and the private partner are completed.

The airline last turned a profit a decade ago despite government bailouts to remain afloat.

Before the rescue processes it had been wrestling with inefficiencies including inappropriate planes, an unprofitable route network and a bloated workforce. The future profitability of the airline depends on various factors including the financial support from the private partner and the uptake of customers for its services along the new route network, Kgokolo said.

Initially, SAA will operate flights from Johannesburg to Cape Town, Accra, Kinshasa, Harare, Lusaka and Maputo. More destinations will be added in response to market conditions, he said.

“We are very careful of the routes that we choose. We want to minimise the exposure to losses. The market is not back to normality so there will be some minimal losses that we have to take in the first two years and see what happens.

“The market is working against us but it is a work in progress. What we are doing is to make sure that we manage the cost base, meaning that we negotiate hard contracts that we enter into. More importantly the routes that we going into [are] selected based on data and market research not just on a hunch or emotions.”

ACTIVIST SHAREHOLDER

The rescue process which ended in April was mainly to place rescue the troubled company on a sound financial footing, maximising its ability to continue as a going concern. The business rescue plan envisioned a restart in July 2020 but was pushed back by a year due to the impact of the pandemic on the aviation sector and a scramble to conclude the rescue process.

Transport economist at the North West University Ofentse Mokwena says the government might be relegated to an activist shareholder in the new SAA.

Though the government’s stake cannot drop below 33%, the public enterprises department might have to publicly contend with the majority shareholder to “argue and galvanise its positions”, he says.