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South Africa should act to preserve its insolvent national airline and seek to associate it with the Ethiopian Airlines Group, according to a study commissioned from ruling party lawmakers.
The assessment, seen by Bloomberg, was prepared by African Aviation Services Ltd and dated October 4. It was presented to a group of lawmakers from the African National Congress on Monday, according to an ANC official who asked not to be named because the information is not public.
South African Airways went into administration in December and now needs more than R10 billion ($ 603 million) to restart, according to a plan drawn up by the airline’s commercial rescuers. The airline has not made a profit since 2011 and has survived thanks to government bailouts.
“There is inherent value in an existing airline that cannot be easily replicated in a new replacement airline,” Nick Fadugba, African Aviation CEO and author of the study, wrote in the paper. “After a thorough analysis, our preferred strategic capital partner for SAA is Ethiopian Airlines.”
Strong market
Ethiopian Airlines shares a “pan-African vision” similar to SAA’s and is the strongest airline in Africa, Fadugba wrote.
Fadugba declined to comment when called by Bloomberg. Public Enterprises Department spokesman Sam Mkokeli was unable to immediately comment and ANC spokesman Pule Mabe did not answer his phone or respond to a text message seeking comment.
“South Africa has the strongest aviation market on the African continent,” Fadugba wrote, citing research showing that five of the 10 most lucrative routes in Africa are within or from South Africa, three of the continent’s 10 busiest airports are in South Africa and six of the 10 busiest routes are within or from the country.
Ethiopian Airlines is willing to provide aircraft, pilots and maintenance services to SAA, but does not want to help pay its debts and cover the costs of cutting its workforce, said Tewolde GebreMariam, the airline’s chief executive, in a past interview. week.
Echoing GebreMariam’s comments, Fadugba wrote that the South African government should take over SAA’s debt and not tax a new partner with them.
The airline is unlikely to be successful unless an investor is found, he said.
“Without a strategic partner, all the ongoing restructuring efforts being made are similar to reorganizing the deck chairs on the Titanic once again,” he said.
Read: Ethiopian Airlines makes limited offer to SAA
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