South Africa to merge state-owned airlines

The government is making moves to merge state-owned airlines South African Express (SA Express) with South African Airways (SAA), Public Enterprises Minister Pravin Gordhan said on Wednesday.

“The first step of consolidating SA Express with SAA has just been concluded, which was to place both airlines within one Shareholder Ministry. SAA has been transferred back to the department,” Gordhan said in his presentation to the South African Parliament’s Portfolio Committee on Public Enterprises.

President Cyril Ramaphosa earlier this month transferred the administration of the South African Airways Act and accompanying functions from the Minister of Finance back to the Minister of Public Enterprises. SAA had been moved from the Department of Public Enterprises to National Treasury in 2014.

Gordhan said the boards and executive leadership of both airlines have been tasked with identifying quick wins, including technical, fuel and route rationalisation, to stabilise the two State-owned airlines.

According to him, the SA Express board is expected to submit a bankable business model for commercial recovery and long-term sustainability.

The Civil Aviation Authority (CAA) had in May announced the suspension of SA Express’s air operator’s certificate and the certificates of airworthiness (CoA) of nine of the 21 aircraft being operated by the airline.

Having undergone a rigorous process to meet the regulator’s standards, the CAA reinstated SAA Express’s Aircraft Maintenance Organisation (AMO) certification on 22 June 2018, with the carrier announcing that it was readying itself for take-off.

Gordhan said SA Express – with its new interim Chief Executive Officer Siza Mzimela – would commence operations next week.

“The entity has received an airline operating certificate from the Civil Aviation Authority and will resume a flight schedule shortly,” said the Minister.

Gordhan had announced in May that the government was considering merging national carrier SAA with SA Express and Mango, as the three airlines fly to the same destinations.

The minister noted that the lack of revenue generation due to the grounding of the airline has exacerbated its challenges. There are also allegations of high levels of corruption, among other things.

SA Express continues to face liquidity and solvency challenges. While government has provided the airline with a government guarantee of R1.74 billion, the department says immediate recapitalisation is required.