SAA, SA Express merger ready for lift-off

Government’s intention to sell equity in its ailing state airlines took another step forward with the announcement that SAA would move from its shareholder, the national treasury, to the public enterprises’ stable.

The airline, which confirmed its sixth straight loss and received R15-billion in government bailouts in the financial year ending in 2017, will now report to public enterprises minister Pravin Gordhan following government’s gazette today.

After the announcement, Gordhan said his department was now well placed to “consider strategic alignment and synergies between SAA and SA Express.”

READ MORE: Siza Mzimela appointed acting CEO of struggling SA Express

“I have had a joint meeting with the chairs and deputy chairs of both airlines and we will now start the process of formalising a joint board committee to give effect to this strategic alignment and operational consolidation.”

This move — together  with the with pace at which the department of public enterprises is intent on merging the two loss-making entities — is a signal of Gordhan’s previous intention that government’s sale of a stake in its aviation assets include SA Express as well.

Operationally this would mean SAA, SA Express, and Mango would all fall under one group management structure and pool resources as well as assets, including aircraft.

While SAA’s financial issues are well-known, SA Express — which has just come out of a forced grounding by the South African Civil Aviation Authority (SACAA) following serious safety concerns — has had its own financial problems and is yet to table its 2017 financials.

The department  also announced that former SAA CEO Siza Mzimela — who has been part of an intervention team deployed by Gordhan recently — would take over as interim chief executive at SA Express following the departure of Matsietsi Mokholo, who will move to the Presidency.

The statement released by treasury this afternoon said the transfer followed a study commissioned by the finance and public enterprises departments to develop an optimal group structure for the state’s aviation assets.

“As executive authority for other major state owned companies, including SA Express, the Minister of Public Enterprises is best placed to be the custodian of all the state’s aviation assets. These assets are South African Airways (SAA), and its subsidiary, Mango, and SA Express.”

The move was welcomed by Democratic Alliance MP and member of the standing committee on finance Alf Lees, who said: “Changing the department that is responsible for SAA will not make the airline profitable. SAA will still require taxpayer bailouts of R5.45-billion in 2018, R5.18-billion in 2019, and R1.93-billion in 2020 to fund the ongoing SAA losses and that the turn-around strategy includes.”

“It may well be that the sensible thing to do would be to liquidate thee other linked entities and cut the losses that the South African taxpayer has to continually fund.”

Lees challenged government to make public its study to develop the optimal group structure for state-owned aviation assets.

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Sabelo Skiti

Sabelo Skiti is an investigative journalist.

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