South African Airways Seeks Long-Term Cash Injection
South African Airways (SAA) is currently debt-free and does not seek additional government funding; however, the airline is actively pursuing a loan facility to bolster its low cash reserves following the unsuccessful ZAR3 billion (USD 170.4 million) investment deal with Takatso Aviation consortium. SAA chairman Derek Hanekom shared these insights during a briefing with the Standing Committee on Public Accounts (SCOPA) on October 22, highlighting the need for a capital injection to enhance the airline’s long-term viability.
Hanekom indicated that while SAA is not budgeting for a capital injection in the 2025 fiscal year, the airline would greatly benefit from an equity partner in the future. He stated, “If something transpires, that will obviously be welcomed and useful, because it would mean that we could bring forward some of the plans that have been pushed back because of the non-availability of the ZAR3 billion.”
The failed deal with Takatso was a significant setback for SAA, as the late Public Enterprises Minister Pravin Gordhan had terminated the agreement after prolonged negotiations. The Takatso consortium was supposed to acquire a 51% stake in SAA for ZAR51 (USD 2.89) while injecting ZAR3 billion in operating capital over the first two years. Without these funds, SAA has had to delay several components of its business growth strategy, according to Hanekom.
In response to the airline’s low cash reserves, SAA is engaging with commercial banks to establish a loan facility that would act as a financial buffer. Hanekom emphasized that, despite being debt-free, the airline’s vulnerability due to low cash reserves necessitates this precautionary measure. He noted a “much more positive approach from the banks” following SAA’s recent stabilization efforts. As the audit of SAA’s 2023/2024 financial results is scheduled for completion in February 2025, Hanekom reassured stakeholders that the airline possesses ZAR5 billion (USD 284 million) in unencumbered property, which could support the loan facility negotiations.
Transport Minister Barbara Creecy underscored the government’s willingness to explore options for finding an equity partner for SAA. She warned that without such a partnership, the airline risks losing market share. Creecy stated that a capital injection is vital for SAA’s sustainability and for supporting the expansion of its regional and international routes.
Mango Airlines Update
In addition to SAA’s challenges, the status of its low-cost subsidiary, Mango Airlines (MNO), remains uncertain as it undergoes a business rescue process. SAA CEO John Lamola reported that the matter is now entirely in the hands of the business rescue practitioner (BRP), Sipho Sono. The BRP recently obtained Supreme Court approval to proceed with the sale of Mango Airlines to the Ubuntu Aviation Consortium. This decision came after previous delays caused by Gordhan’s insistence on further information regarding the bidder’s corporate structure and business plan.
According to Sono’s latest update, the deal is awaiting approval from the Air Services Licensing Council (ASLC), which is responsible for awarding new licenses and route authorities. The BRP plans to expedite this process to bring finality to the sale as soon as possible. Ubuntu Air Services aims to diversify its business through the acquisition of Mango Airlines, proposing a share purchase of ZAR1,000 (USD 56.7) and assuming Mango’s ZAR169 million (USD 9.5 million) in unflown ticket liabilities. The consortium plans to inject ZAR30 million (USD 1.7 million) for startup capital and potentially an additional ZAR100 million (USD 5.6 million) to relaunch regional and domestic flights.
In summary, while South African Airways currently stands debt-free, the need for long-term financial stability is critical as the airline navigates its future challenges. Both SAA and its subsidiary Mango Airlines are seeking strategic partnerships and financial support to ensure their ongoing viability in a competitive market.
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Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com