New SAA plan not cleared for take-off
Union investment firms say airlines make little sense
The question of funding was left hanging over plans for a new state airline after any ideas of tapping union investment companies for financing were quashed last week week.
But a final plan by the business rescue practitioners to be presented this week may begin to provide clarity on who will pay for the new airline and what form it could take.
With the government pushing for a “new” state-owned carrier to emerge from the ashes of SAA, speculation surfaced that union investment companies might invest.
But the metalworkers union’s Numsa Investment Company and the Mineworkers Investment
Company, which is linked to the National Union of Mineworkers, poured cold water on this.
Numsa Investment Company CEO Khandani Msibi said the group did not have a strategy for the airline industry and preferred to focus investments in the biotech and financial services industries.
Msibi said he was aware of talk the company could be interested but said this was not something it had considered.
“We don’t know anything about the airline industry and this topic hasn’t been before our board.”
Oren Fuchs, senior stakeholder manager at the Mineworkers Investment Company, said “it would make little commercial sense to invest in an airline”.
Last week the draft business rescue plan by SAA’s business rescue practitioners said it would take R21bn to settle SAA’s obligations and capitalise a new airline.
Asked if the government should spend billions on failed state-owned enterprises (SOEs) and a new SAA, deputy finance minister David Masondo said: “The key question for us is how does the government get money to spend.
“Once that question is settled, we can discuss how much should be spent and on what to stimulate the economy.”
He added: “We have almost 700 SOEs and we honestly do not need all of them. Many of the SOEs are a drain on our fiscus. We have to generate criteria according to which we decide which ones we need and for what. We also need to rethink the extent of government ownership in some of them.”
Public enterprises spokesperson Sam Mkokeli said the aviation industry was “absolutely crucial to SA’s efforts to fight the Covid pandemic and also crank up the economy from the doldrums”.
The International Air Transport Association said it could take up to four years before 2019 revenue levels for international air traffic were reached.
Dawie van der Merwe, a business rescue practitioner and director at BDO Business Restructuring, said: “Where do you find this magnitude of capital? You have this run-into-the-ground national carrier but also an industry that has been decimated globally by Covid. Nobody wants to touch aviation.”
Linden Birns, MD of Plane Talking, said most airlines, when starting out, required three or four years until they broke even.“It’s not just settling debts, renegotiating leases, downsizing headcount. There’s got to be a sensible financial plan to accompany a realistic business plan.”
Aviation economist Joachim Vermooten said if SAA wanted to start in a “profitable and sustainable way”, it had to break with the past.
This could mean being an international carrier and leaving domestic and regional routes to others.
SAA’s business-rescue practitioners said they would deliver a final plan to creditors on Monday after receiving feedback from unions, the government, creditors and funders.
While the draft plan had no details of suggested routes for the new airlines, Vermooten said the government could have a legitimate argument as far as “intercontinental connectivity is concerned”.
“It does not have to be on the same pre-Covid-19 scale, so I agree with the previous views of the business-rescue practitioners that international activity should be cut back to five or six routes to be operated as a focused entity.
“Successful governmentowned airlines are primarily operating intercontinental services.”