SAA said to be urged to partner with Ethiopian Airlines

SA should act to preserve SAA and seek to partner the carrier with Ethiopian Airlines Group, according to a study commissioned for ANC MPs.

The assessment, seen by Bloomberg, was prepared by African Aviation Services and dated October 4. It was presented to a group of ANC MPs on Monday, according to an ANC official who asked not to be identified because the information was not public.

The insolvent national carrier went into administration in December and now needs more than R10bn to restart, according to a plan produced by the SAA’s business rescuers. The airline has not made a profit since 2011 and has been surviving on government bailouts.

“There is inherent value in an existing airline which cannot be easily replicated in a new replacement carrier,” Nick Fadugba, the CEO of African Aviation and the author of the study, wrote in the document. “After a thorough analysis, our preferred strategic equity partner for SAA is Ethiopian Airlines.”

Ethiopian Airlines shares a similar “pan-African vision” to SAA and is Africa’s strongest carrier, Fadugba wrote.

Strong market

Fadugba declined to comment when called by Bloomberg. Department of public enterprises spokesperson Sam Mkokeli couldn’t immediately comment and ANC spokesperson Pule Mabe did not answer his phone or respond to a text message seeking comment.

“SA has the strongest aviation market on the African continent,” Fadugba wrote, citing research that shows that five of the 10 most lucrative routes in Africa are in, or from, SA, three of the continent’s 10 busiest airports are in SA and six of the 10 busiest routes are in or from the country.

A spokesperson for Ethiopian Airlines said on Tuesday that the airline had “no official report” on the study.

Ethiopian Airlines is willing to provide planes, pilots and maintenance services to SAA, but doesn’t want to assist with paying off its debts and meeting the costs of cutting its workforce, Tewolde GebreMariam, the airline’s CEO, said in an interview last week.

Echoing GebreMariam’s comments, Fadugba wrote that the SA government should take over SAA’s debt and not encumber a new partner with it.

The airline is unlikely to succeed unless an investor is found, he said.

“Without a strategic partner, all ongoing restructuring efforts being made are akin to once again rearranging the deck chairs on the Titanic,” he said.

Bloomberg