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Ethiopian Airlines Group is among the companies in talks with the South African government about the possibility of offering support to the country’s insolvent state airline, according to people familiar with the matter.
Africa’s largest airline is considering ways to help South African Airways fly again after more than five months of inactivity, said the people, who asked not to be identified because the conversations are private.
Participating in the airline is one of the options under discussion, they said, although negotiations are ongoing and an agreement may not be reached.
South Africa needs to raise more than R10 billion ($ 595 million) to revive SAA, according to a bailout plan compiled by administrators and backed by both the state and labor groups.
However, Finance Minister Tito Mboweni has said that funds should come from private sources, pledging only to help “mobilize” the required amount. SAA was placed under administrative protection in December, before the coronavirus crisis hit.
Much of the funding is likely to come from private financial backers rather than Ethiopians, bringing more operational experience to the table, the people said.
Ethiopia’s chief executive, Tewolde GebreMariam, said the talks took place in the past, but were suspended. He referred questions about the current situation to Abel Alemu, the airline’s regional manager for South Africa, who did not immediately comment.
A spokeswoman for SAA administrators declined to comment.
The Department of Public Enterprises said last month it had received up to 10 expressions of interest from “private sector funders, private equity investors and partners.” Those refer to the main airline and its subsidiaries, namely the low-cost airline Mango, the Air Chefs catering division and the SAA Technical maintenance unit.
Up to four of the proposals are promising, DPE director general Kgathatso Tlhakudi said in an interview. The DPE declined to comment.
In addition to Ethiopian, there has been a compromise between the government and the Gulf giant Emirates about its codeshare agreement with SAA.
“Emirates can confirm that it has been in contact with South African Airways for general discussions related to the codeshare partnership between both airlines,” said a spokesperson.
SAA has lost money for nearly a decade, depending on government debt bailouts and guarantees. It was forced to suspend all commercial passenger flights in March when South Africa closed its borders to contain the pandemic.
International travel continues to be banned from South Africa for leisure purposes, although domestic flights were recently given the green light as part of a broader economic reopening.
Tewolde said last year that the state carrier would be interested in buying a stake in SAA if approached, though that company has since battled its own severe revenue shortfall due to Covid-19 travel bans since.
SAA’s need of R10 billion includes R2.8 billion for aircraft to fly again and R2.2 billion for voluntary severance packages to reduce the workforce to 1,000 employees from approximately 4,800. Around R3 billion is needed for ticket refunds and R1.7 billion for aircraft leasing companies.
Read: The government says it has received more than 10 offers to buy SAA, but there are serious conditions attached
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