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SAA chief on why it is different this time

Chief Executive Officer of South African Airways, John Lamola, says the newly reformed airline will shake off government interference, and promises profitability.

Speaking to CNN’s Richard Quest, Lamola said the SAA’s problems over the past two years are not unique to the state of the global aviation industry because of Covid-19 – but he said the new airline is coming out of the crisis with a new goal in mind.

“From where the industry is now emerging, South African Airways is not unique. During the Covid era, governments around the world raised more than $ 200 billion to help airlines carry out their strategic role,” he said.

However, SAA emerges from the pandemic with a restructured company, as a whole new operation, which is advancing as a public-private entity. “For the first time, it will be run by a private entity,” Lamola said.

When asked about the years of losses that necessitated costly rescue efforts by the government – as well as the widely reported interference from government officials and other politicians – Lamola said the new SAA goes further than that.

“It’s not just about bailouts,” he said. “(In recent years) the South African government has been the main shareholder – and like any other shareholder, if their investment is in trouble … the government has always come into play.”

Lamola said the airline is a strategic asset to the government, hence its involvement. However, he emphasizes that the mentality has changed and that things are now “completely different”.

“(The new SAA) is now in the majority owned by a non-governmental entity, and secondly it is an agile, excluded airline with a straightforward strategy to unlock the African market,” he said. Lamola said Africa makes up only 2% of the global aviation industry and has many opportunities for a company like the new SAA.

While the government is no longer the majority shareholder in the new SAA, Bloomberg announced in May that it has retained special voting rights and will receive R3 billion in preference shares that can be redeemed through future cash flow.

That means the state will benefit if the new owner, the Takatso Consortium, raises a carrier that struggles under years of heavy losses, corruption and mismanagement, according to the Department of Public Works.

Takatso – consisting of a local jet lease company and private equity firm – will provide R3 billion in working capital and has valued SAA’s assets at about the same amount, the department said.

The group agreed to take control of the airline almost a year ago for a nominal sum of about $ 3, in exchange for expenses of obligations and responsibility for operations.

Details of the deal appeared after the National Treasury criticized the terms, saying SAA represents a “conditional liability” because the government may be liable for certain costs. The state will still be on the alert for outstanding “business rescue obligations” arising from the company’s near-18-month bankruptcy proceedings, Takatso said in a separate statement.

The government’s voting rights, known as a gold stake, would mean that SAA could not be sold without its permission and that the state would retain a stake of at least 33.3%, the DPE said. It would also have full voting rights on “matters of national importance”.

The country’s aviation industry has meanwhile continued to struggle to contend with the liquidation of one of its largest domestic airlines, Comair.

Comair made up about 40% of domestic flights, and its closure has put increasing pressure on its competitors, such as FlySafair, and partners, who are struggling to close the gap left in the market.

Flysafair has promised to add more routes and more aircraft to its fleet in the coming months, to meet demand.


To read: Large travel shift expected to hit South Africa: FNB



SAA chief on why it is different this time

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