South African Airways 5-year corporate plan needs government approval |

State-owned airline South African Airways (SAA) has submitted a 5-year corporate plan for approval by the government, involving obtaining an investment facility, looking for a potential strategic equity partner, and restructuring the group into three purpose-specific entities. We got this update from the airlines last year. A period of mismanagement had led to SAA entering business rescue (similar to Chapter 11 in the USA) in December 2019 when the government refused to provide any more bailouts or guarantees. The airline could exit business rescue in April 2021 in a much leaner form, initially restarting only a few domestic routes and then gradually expanding its network again to now include some domestic and regional flights as well as direct long-haul flights between Johannesburg and Sao Paulo (Brazil) and Perth in Australia. The airline plans to focus on high-demand routes and enhancing connectivity to key destinations. For example, it hopes to potentially restart flights to the USA (Washington D.C.) via Accra in Ghana by mid-2026. It also sees opportunities to boost its cargo and charter capacity. In the corporate plan, seen by Airinsight, SAA admits that it remains in a fragile financial position despite showing its first net profit in ten years (about $13.4 million) during the 2022/2023 financial year and showing a positive balance sheet of R4.7 billion. The audited 2023/2024 financial results are expected to be released in May 2025 and SAA is confident that it will show a much higher net profit. It is unclear when the 2024/2025 results will be finalized. SAA believes its long-term sustainability depends on its ability to execute the plan. Basically, the plan hinges on first obtaining an investment facility of R2.25 billion (about $117.8 million) from local South African banks for the purpose of mitigating against potential liquidity risks and to support the tactical expansion of the airline’s route network. Once such a facility is in place, SAA wants to once again try and find a strategic equity partner to provide capital, technical experience, and access to global aviation networks. A previous attempt at striking such an equity partnership failed in March 2024. The government had selected the Takatso Consortium, consisting of Harith (an investor in African infrastructure) and Global Aviation (operator of the low-cost domestic airline LIFT) to obtain 51% of the shares in the airline, but with certain government voting rights remaining. However, the country's Competition Tribunal ruled that the consortium's minority shareholders (which included Global) had to sell their shares to avoid a potential conflict of interest. When this did not materialize, the deal failed. The corporate restructuring proposed by SAA’s 5-year plan aims to attract investment and create synergies and benefits, including in relation to its subsidiaries SAA Technical and AirChefs. The proposal is for a group holding company as an umbrella over three sub-entities. One sub-entity is to comprise the airline itself, another to see how value could be derived from the group's property portfolio, and the third to focus on aircraft asset management to consolidate its aircraft leasing requirements with aircraft acquisition, leasing, maintenance, repair, and overhaul services. The airline also still wants to divest from its own low-cost subsidiary Mango, which has been in business rescue and not flying since July 2021. SAA’s corporate plan states that it wants to invest in modernizing and expanding its fleet to meet growing demand, enhance operational efficiency, and drive profitability. The plan mentions that this could include acquiring fuel-efficient, next-generation aircraft such as the Airbus A350, A330, and A32neo families as well as Embraer regional jets. SAA currently has a wet lease agreement with SunExpress (a joint venture between Lufthansa and Turkish Airlines), to utilize SunExpress aircraft. In the view of aviation economist Joachim Vermooten, SAA needs to demonstrate that it has full control over its assets and liabilities. He points out that South Africa’s auditor-general recently recommended that key policies and procedures that drive financial and record-keeping functions at SAA must be reviewed and updated or designed and implemented where they did not exist, and that strict consequence management practices must be ingrained in the culture of the airline. “SAA needs to establish appropriate policies and proper corporate governance and internal control processes to demonstrate an unqualified audit report with the publication of its next set of annual reports, which are due shortly,” Vermooten told Airinsight. “This is necessary to show financial institutions that they can trust the figures and be able to assess the reasonability of forecasts and projections.” SAA's corporate plan shows the airline is well aware of having to address these issues. The plan talks of "robust governance and ethical frameworks" and states that "a concerted and systematic audit remedial plan is underway and will remain the preoccupation of management during the first two years of implementing the corporate plan”.

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