SAA interim boss urges finalisation of Takatso deal

The long-delayed takeover of SAA by the Takatso consortium still faces a number of regulatory hoops before it can be finalised, though the stricken airline’s interim CEO John Lamola says the deal needs to happen as soon as possible for SAA to regain market share.

An announcement that the Takatso consortium would take a 51% stake in SAA with the government retaining 49% was made about two years ago.

Earlier this month the Competition Commission recommended the approval of the sale, which now has to be confirmed by the Competition Tribunal.

“The onboarding of the strategic equity partner needs to happen as soon as possible through regulatory approvals in order for SAA to regain market share,” Lamola told parliament's public enterprises committee on Wednesday. “The operating model is not up to scale for profitability. There are not enough aircraft to take advantage of growing market demand.”

SAA has lost its traditional market share — it now only has 16% of the domestic market — and is losing lucrative regional/Africa routes to competitors, Lamola added.

Takatso Aviation spokesperson Thulasizwe Simelane said in a recent interview that “given the current market coincidence of an uptick in demand and a gap in supply in the aviation sector, [we are] anxious for the transaction to move apace, to enable SAA to take full advantage of these conditions that won’t last too long.”

Takatso had “for some time now” been engaging third-party funders to secure the funds needed to meet its obligation to invest in SAA’s growth, Simelane added.

In March, SAA was flying to 12 destinations, 10 of them regional and two domestic. The aim is to expand this to 20 destinations, one intercontinental, 16 regional and three domestic by March 2024.

Additional aircraft

Public enterprises minister Pravin Gordhan and finance minister Enoch Godongwana have given SAA approval to acquire six additional aircraft.

But the extended process of getting everything in place for the introduction of the strategic equity partner still has further hurdles to clear. Lamola said SAA will have to apply to the relevant aviation regulators for permission to transfer ownership and management of the national carrier.

“Prior to the transfer of shares, [SAA will have to] ensure all conditions precedent are either fulfilled or appropriately waived to maintain the legality and integrity of the transaction,” he said.

A new governance structure will have to be set up for management and decision-making under the consortium, which may involve forming a new board of directors and executive leadership.

Also required is the implementation of agreed strategies for SAA’s growth and development, focusing on areas such as operational efficiency, market expansion, and customer service improvements.

Profitability on the horizon

Lamola said SAA was projecting a profit for 2023/24. Subsidiary SAA Technical was operating profitably and the other subsidiary Air Chefs had been profitable for the past two months. Mango Airlines, another subsidiary, is in business rescue but there are legal challenges on the preferred strategic equity partner bidder.

Lamola told MPs that airline operations as measured per each route that is operated will be profitable in the 2022/23 financial year. Passenger and cargo revenue will exceed budget, and earnings before interest, depreciation, tax and amortisation will be positive. SAA’s current cash position is positive.

SAA group’s external audit for the four years from 2018/19 to 2021/22 is under way and at the wrap-up stage, he added.

“Producing SAA group financial statements for four financial years and having them audited simultaneously starting from August 2022, to complete in March/April 2023 was a mammoth task,” he said. The auditor-general commenced the audit of the SAA group for these years in August 2022.

“SAA has not had a clean audit in many years as auditors qualified their opinions on some of the matters and disclaimed their opinions on others. It will take a number of years to clear the audit findings, particularly as there has not been sufficient time between audits to address these,” Lamola said.

“A final draft external audit report is expected at the end of May 2023 and will be deliberated at various governance levels during June 2023.”

ensorl@businesslive.co.za