SAA, Mango and SA Express could be merged


South African Airways’ (SAA’s) ninth turnaround plan may see SAA, SA Express and budget subsidiary Mango merged into a single holding company to reduce running costs, although the brands would be kept separate.

This was revealed by Public Enterprises Minister Malusi Gigaba in Parliament yesterday when discussing SAA’s latest Long-Term Turnaround Strategy. The minister said the merger process was complex and that the government would only be able to tell if this was feasible by early next year, according to Business Report.

Gigaba said the 12-year turnaround plan would involve cutting unprofitable and non-essential routes – many international routes run at a loss. “The focus on domestic and regional African routes will have a direct financial impact on SAA,” Times Live quotes him as saying.

Some of the main points of the turnaround strategy include increased efficiency, cost savings and fleet renewal. Fleet renewal will result in lower operating costs as older aircraft are replaced by more efficient models. SAA on July 23 took delivery of the first of 20 new Airbus A320s and in late July issued a tender to Airbus and Boeing to bid for 23 new widebody aircraft for delivery from 2017.

SAA CEO Monwabisi Kalawe is reported to have said the new turnaround strategy was the most comprehensive in the carrier’s history but that turning the airline around would be challenging. He could not give any more details on routes, the merger or recapitalisation.

SAA recorded a R1.25 billion loss last year, prompting a R5 billion National Treasury loan guarantee. The state-owned airline has accumulated losses of R14 billion over the last few years and received more than R15 billion in shareholder support.

Natasha Michael, opposition Democratic Alliance (DA) party Shadow Minister of Public Enterprises said that the new turnaround strategy “does not instil confidence that the public carrier will be stabilised,” and called for SAA to be privatised.

She accused Gigaba of failing to provide clarity on key elements of the turnaround strategy, such as its cost, whether it will result in job losses, what routes will be cut and whether SAA, SA Express and Mango would indeed be merging.

The local airline industry is facing tough conditions with stiff competition (Fastjet and FlySafair are set to launch within a month), high fuel prices and a weak rand.