South African Airways in talks with Ethiopian on a rescue deal

The South African Airways Airbus A320 at the Cape Town International Airport

CAPE TOWN – South Africa’s national flag carrier South African Airways is in talks with Ethiopian Airlines Group on a potential rescue deal that will see Ethiopian potentially offering support to SAA in an effort to rescue the airline from insolvency.

South African Airways (SAA) has been dormant for more than five months, it is currently in talks with several airlines including Ethiopian with the hope striking a deal that will see it return to skies soon. According to people familiar with the matter, negotiations with the South Africa government are still underway, with a deal with Ethiopian Airlines taking up an equity stake in SAA looking more likely.  There is also a possibility of the deal failing to happen should the terms not be palatable for either parties.

A rescue plan compiled by administrators a few months ago which has the backing of both the South African government and labour groups need approximately R10 billion (US$600 million) to be implemented viably. The SA Minister of finance Tito Mboweni had stressed that the funds required to implement the plan should be sourced from the private sector. The South African government is no longer able to continue bailing out the airline as previous bailouts of the airline from the national fiscus have been faced serious political resistance. SAA was placed under business rescue late last year.

In the case where private financiers get involved, the deal will see Ethiopian Airlines only bringing in its technical expertise that has seen it earn the reputation of being Africa’s best run and largest Airline.

The South African Minister of Public Enterprises Pravin Gordhan says Ethiopian is “one of many” interested parties that the Pretoria administration has been in talks with. A spokesperson for the Department of Public Entreprises is quoted saying there is as many as four promising proposals. The Gulf air giant Emirates is also among some of the airlines that is said to be in talks with the Pretoria administration on a potential deal to run the airline.

The South African Department of Public Enterprises last month said it had received 10 expressions of interest from potential private equity investors.

There had been rumoured reports of talks between Ethiopian Airlines and the South Africa government with people familiar with the matter saying the deal between the two parties initially foiled.

With South Africa having experienced a hard Lockdown as a result of the COVID-19 pandemic, international travel is currently suspended.

 

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