#image_title
Today, in South Africa’s parliament, the deal between the state and an investment group to take over the airline collapsed. What happens next is open to speculation, but it seems the state is back on the hook to fund the enterprise.
Here’s some history
- In 2001, the airline had its first run-in “with broke every corporate governance rule in the book“
- By 2017, things had “progressed” regarding corruption, conflicts of interest, and “ghost workers.”
- And today, here we are
The state decided that the terms of its deal with the investor group Takatso had changed. The to-and-fro on the agreement is bewildering. A recent Auditor General report was damaging. Public Enterprises minister Pravin Gordhan said: “SAA can sustain itself for 12-18 months; won’t get more money from Fiscus.”
A former airline executive who worked on a potential deal for SAA several years ago said his group withdrew because of the state’s unrealistic expectations.
SAA had most of its fleet repossessed or sold. What was once Africa’s most iconic airline is now a shadow of itself. SAA’s fleet movements are interesting.
An Iranian Angle
There are rumors that Mahan Air is buying several ex-SAA Airbus A340-313s, including ZS-SXB, pictured below. This aircraft was seen in Tarbes, France, being prepared for a flight to Dubai for delivery to Afghanistan’s Kam Air, an airline reported to have “a good relationship” with Mahan Air.
This type of transfer has occurred before. On December 23, 2022, four ex-Turkish A340-300s flew from Johannesburg to Uzbekistan, but they landed in Iran and remained there. Mahan Air also bought four RJ85s from South Africa via India. There are other awkward aspects to South Africa’s relationship with Iran.
This is FlightRadar24’s tracking of the pictured aircraft’s flight to Afghanistan. Its next leg will be worth watching. The aircraft is being worked on in Dubai.
Takatso Responds
Takato issued the following statement statement.
The highlights from the document are:
- Takatso Aviation and the Department of Public Enterprises mutually agree to terminate the SAA Transaction.
- Takatso believes the transaction is no longer in the interests of its stakeholders.
- Protracted negotiations for a revised transaction structure introduce unacceptable levels of risk.
- Takatso sought to exploit aviation sector opportunities, but these have diminished since the SPA signing.
Takatso rightly mentions risk and diminished opportunities. Here are some examples.
The following chart shows South Africa’s air traffic. In the domestic market, SAA has several competitors. They will not give SAA any quarter in terms of market share. SAA can’t compete without state support. There are reports of SAA poaching competitor staff by offering higher salaries.
The sharp rise in international traffic in the chart above is intriguing. SAA should have the lion’s share, but not anymore.
The following chart shows traffic from the US to Africa. Note the position SAA used to have and its precipitous decline. Other inbound markets to South Africa may be larger than the US; the patterns are the crucial items to focus on.
South Africa accounted for 42.3% of US outbound African traffic in 2010. Through November 2023, this had declined to 27.7%. South Africa is still the largest African market for US travelers, and while Ethiopia was at 11.3% in 2010, through November 2023, it was at 24.3%.
Slicing the data to focus on South Africa, the inbound US market has grown to the highest level since 2010, with December yet to be reported. Delta and United compete vigorously, and can one realistically expect SAA to compete with these two?
The SAA situation is messier than ever, and Minister Gordhan estimates that SAA has enough funding to last 12-18 months. In 2018, the airline was reported burning through R350-400m monthly. That’s less than $20m at current exchange rates but likely more than the state will cover.
