Is this the end for South African Airways?

  • The deal between Takatso Consortium and the government to save South African Airways fell through as negotiations ceased.
  • This is because amid improvements in demand and the economy post-COVID, the national airline no longer needs saving, government claims.
  • Government will now create a new business plan for the carrier, including the establishment of new routes and the purchase of more aircraft.

As South African Airways (SAA), the national government-owned airline, went into business rescue just before the COVID-19 pandemic took hold, a deal between the state and the private Takatso Consortium was being planned in order to save the haemorrhaging carrier from shutting down.

Now, four years after South Africans first got wind of that deal, supposedly SAA’s last gasp for salvation, the deal has fallen through. It was terminated by the South African government, in particular the Department of Public Enterprises.

“We regret to announce that both DPE and Takatso agreed that negotiations on the transaction have been terminated as there was no agreement on the revised transaction structure. This arises largely from a new business and asset valuation undertaken by professional firms,” the department explained in a press statement published on Wednesday evening.

According to the department, the reason why the deal was cancelled after four years, is that SAA no longer needs saving.

“In the last three years it became clear that the market conditions have changed, the economy had improved, the demand for flying had increased formidably,” it said. The original deal would have seen Takatso own 51 percent of the airline, with the state owning the other 49 percent. This would give the private consortium a controlling stake.

It seems the government believes SAA is now worth more than it was when it went into business rescue, which necessitates a new valuation on the business. When the first valuation was conducted during the pandemic, the airline’s assets were valued at R2.4 billion and the business was valued “between 0 and negative.”

At that time the airline was grounded for 16 months, and retrenched around 1 000 employees to narrow operation costs.

However, after a more recent valuation was conducted, the department says that, “The business valuation came out at R1 billion and the property valuation at R5.5 billion.”

“It became clear in the negotiations that the revised transaction structure must take into account public interest and fair market price. However, these requirements were not met in the renegotiations,” it added.

It is because of this that the government decided to terminate the agreement to sell the stake to Takatso and also completely cease negotiations.

SAA enjoyed a national relaunch last year in October, two years after the date it faced liquidation. “The upcoming event marks a very significant step in the resurgence of South African Airways. We look forward to the official relaunch of SAA, along with the introduction of its first intercontinental flight to São Paulo, Brazil,” said Public Enterprise Minister Pravin Gordhan at the time.

Gordhan is expected to tender his resignation as minister after the 29th May general elections this year. He was among the state’s leaders in the deal with Takatso.

In the meanwhile, government is expected to devise a new plan for SAA to make more money, including the purchase of new aircraft and the establishment of more flight routes to other countries. The airline will revert to being 100 percent state owned.

“We are confident that SAA will continue to fly and grow in terms of the number of routes and aircraft that it is able to lease,” said the department, adding that it would be looking at new ways to raise finances for the carrier.

[Image – CC BY-SA 2.0 Alan Wilson on Flickr]


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