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South African government sells majority stake in airline SAA to consortium

Stock MarketsJun 11, 2021 08:37AM ET
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© Reuters. FILE PHOTO: A South African Airways (SAA) plane taxis after landing at O.R. Tambo International Airport in Johannesburg, South Africa, January 18, 2020. Picture taken January 18, 2020. REUTERS/Rogan Ward/File Photo

By Nqobile Dludla

JOHANNESBURG (Reuters) -The South African government is selling a 51% stake in South African Airways (SAA) to Takatso consortium, which will initially commit more than 3 billion rand ($221 million) to give the struggling airline a new lease of life.

SAA has been under a form of bankruptcy protection since December 2019, but its fortunes worsened during the COVID-19 pandemic and all its operations were mothballed in September 2020 when funds ran low.

The airline is one of a handful of South African state companies that depend on government bailouts, placing the national budget under huge strain at a time of rapidly rising debt.

The partnership with Takatso will alleviate that financial burden, public enterprises minister Pravin Gordhan told journalists on Friday as the state would no longer provide any funding to the airline, which exited administration in late April after receiving 7.8 billion rand from the government.

Gordhan added that the government will retain a 49% stake with the intention of eventually listing the airline to address future funding requirements.

"The objective of bringing in an equity partner to SAA is to augment it with the required technical, financial and operational expertise to ensure a sustainable, agile and viable South African airline," he said.

The consortium includes pan-African investor group Harith Global Partners (NYSE:GLP) and aviation group Global Aviation, Gordhan said.

Following the announcement, co-founder and consortium Chair Tshepo Mahloele told Reuters that 3 billion rand should be sufficient to operate the airline for 12 to 36 months.

The government could dispose of more of its ownership stake going forward, he added.

"They aren't married to this 49%," he said. "They won't be putting more money into this asset."

An initial public offering for the airline is unlikely to happen within the next three years, and SAA would first need to become profitable, Takatso Chief Executive Gidon Novick said.

Novick said Takatso would seek to relaunch SAA as soon as possible, prioritising first domestic service followed by regional destinations.

International long-haul routes would follow but would be selected carefully, and SAA would also work to forge partnerships with major carriers.

"We're going to be competing with the greatest airlines in the world, and we need to be mindful of that," Novick said.

The airline's subsidiaries meanwhile will be evaluated, in particular Air Chefs, SAA Technical and low-cost airline Mango, Gordhan said, noting that "anything can happen" when asked if some could be shut down.

SAA will continue to be domiciled in South Africa and the government will have a "golden share" of 33% of the entity's voting rights and certain areas of national interest, Gordhan said.

($1 = 13.5379 rand)

South African government sells majority stake in airline SAA to consortium
 

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