Many competitors are scared of SA Airways’ (SAA’s) comeback, according to public enterprises minister Pravin Gordhan.
He was guest speaker at a celebration on Thursday of the relaunch of the state-owned airline’s first intercontinental flight since coming out of business rescue in April 2021. The plan is to widen SAA’s destinations in South America.
“There will not only be pink and blue on the tarmacs any more. SAA is an entity rising from the ashes like a phoenix. Many thought the airline would not survive. Some wanted to liquidate it. Today it is expanding, but in a careful way,” Gordhan said at the event at the Cape Town Yacht Club.
“There are many naysayers who wish for SAA not to work, but it is going to become a success. The intercontinental flights to São Paulo is just a start. South Africans will benefit from it as no more taxpayers’ money will go into the airline.”
Gordhan said the government poured R40bn into SAA over about a decade before it went into business rescue. Now the airline has to survive “on its own money” to be supplied by the chosen strategic equity partner, the Takatso Consortium.
He is hopeful that the deal, which was announced in June 2021, could be finalised later this year and bring sustainable funding for SAA.
Takatso consists of infrastructure investment company Harith as the majority partner and Global Aviation as one of the minority partners.
The Competition Tribunal has approved the deal on condition that Global Aviation, which co-owns and operates LIFT airline, exits the consortium to avoid a clash of interests. The minority partners are trying to sell their shares.
According to Gordhan, all SAA’s debt stemming from the business rescue process has been cleared, and there is no legacy debt left, only some unflown ticket liabilities. It has been one of Takatso’s conditions from the start that it will not come on board until all the legacy debt has been settled.
SAA interim CEO John Lamola praised Gordhan for “shepherding” SAA to what it is today.
“We are running a textbook airline and want SAA to be commercially sustainable. We studied potentially relaunching routes to London, New York and Frankfurt, and Sao Paulo came up as the safest bet,” said Lamola.
Brazil was the largest untapped market for Cape Town before the pandemic. It grew 26% a year from 2015 to 2019.
According to Paul van den Brink, project lead for Cape Town Air Access (CTAA), and tourism minister Patricia de Lille there are joint marketing efforts under way between SA and Brazil.
“We also need to get investors to come here so an economic strategy is also needed to have business and leisure drawn here,” said De Lille, who was also speaking at the event.
Willie Walsh, director-general of the International Air Transport Association, recently told industry publication Airline Business that the Latin American airline sector struggles to make money. The profitability of airlines in the region still lags that of the rest of the world, despite the region having huge potential. Costs are affected mostly by higher-than-average fuel prices since fuel has to be imported. Airline taxes and charges are also high.
Nevertheless, in Gordhan’s view the prices of tickets out of SA are expensive.
“The launch of SAA’s Brazil flights is important as competition is supposed to bring prices down,” he said. “South-south trade and co-operation are important to get the southern hemisphere up to the level of the north.”
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