National airline SAA has submitted a five year, two-phase corporate turnaround plan to the government that could see it going to the market for a R2.25bn investment facility and seeking a strategic equity partner.
According to the restructuring plan, which Business Day has seen, SAA intends to overhaul its governance structure, creating a three-tier entity including a group holding company, which would have under it a property company, an aircraft asset management company and the airline itself.
As for low-cost subsidiary Mango, which has been in business rescue since July 2021, SAA said it wanted to finalise its divestiture.
By the time the national airline itself went into business rescue in December 2019 it had been beset by a series of financial and mismanagement problems that saw it go through numerous bailouts. The rescue plan involved R27bn and the reduction of SAA staff from about 5,000 to 1,000.
The newly submitted corporate plan has no indication that SA will rely on government funding in the future.
SAA’s turbulent past includes severe funding and liquidity constraints, which resulted in repeated government bailouts. Its problems were compounded by a global no flying order implemented during the 2019 Covid pandemic.
It is admitted in the new corporate plan that SAA remains in a fragile financial position and that its long-term sustainability will depend on its ability to execute the plan.
It recorded its first net profit in 10 years of R252m for the financial year 2022/23. In addition, its balance sheet registered positive equity of R4.7bn, all of its legacy debt obligations were settled and it became debt free.
The airline expects that the 2023/24 audited financial results, expected to be released next month, will disclose a far higher net profit.
This corporate restructuring aims to attract investment and create synergies and benefits.
A study done by Oxford Economics Africa in October 2024, indicated that by financial year 2029/30 SAA has the potential to contribute R32.6bn gross value added to SA’s GDP, support 86,700 jobs and contribute R6.4bn in fiscal revenue.
Group CEO John Lamola said the first phase of the restructuring, which will end in 2027/28, would focus on securing funding in the form of a R2.25bn loan facility from local banks to mitigate potential liquidity risks and support the tactical expansion of the airline’s route network.
During this phase SAA also wants to invest in modernising its fleet and enhancing its corporate infrastructure to drive profitability. Lamola said these activities would take place against the backdrop of “robust governance and ethical frameworks”.
The second phase would focus on attracting strategic equity partners to provide not only capital but also technical experience and access to global aviation networks.
Other focus areas set for this second phase of SAA’s corporate plan include the establishment of an aircraft asset management company to consolidate its aircraft leasing requirements with aircraft acquisition, leasing, maintenance, repair and overhaul services.
SAA wants to introduce new, fuel-efficient aircraft, reducing the airline’s environmental footprint. It also wants to see how it can extract value from its property portfolio.
A third aspect during the second phase would be to enhance its route network by establishing or having an interest in an airline that operates the tertiary routes that feed SAA’s regional and intercontinental routes.
The airline plans to focus on high-demand routes and enhancing connectivity to key destinations. For example, it plans to fly to Washington DC in the US, via Accra, Ghana, from mid-2026.
The airline also sees opportunities to boost its cargo and charter capacity. As for subsidiaries Air Chefs and SAA Technical, the corporate plan envisions addressing misalignments between the airline’s operations and these service provider subsidiaries.
It will not be the first time that SAA has tried to obtain a strategic equity partner. In 2021 then public enterprises minister the late Pravin Gordhan announced the Takatso Consortium as the preferred strategic equity partner to obtain 51% of SAA’s shares by injecting about R3bn into the state flag carrier.
However, in March 2024 it was announced that the deal had failed as certain requirements set by the Competition Tribunal could not be met.
SAA believes its corporate plan will provide the bold and pragmatic path it needs to establish long-term financial sustainability against a backdrop of global aviation challenges as well as an unstable geopolitical and economic landscape.
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