Investors in the new SAA: Govt is bluffing, experts believe
- Government contends there are “serious” investors interested in SAA.
- But aviation experts doubt that.
- Previously interested parties would have been hit very hard by the coronavirus crisis.
- For more stories got to www.BusinessInsider.co.za
Government contends there are “serious” investors interested in South African Airways, but aviation experts seriously doubt that.
A majority of SAA's creditors voted on Thursday to postpone a meeting to vote on a proposed rescue plan. They will now vote on whether to proceed with the plan on July 14. The plan requires government to come up with about R10.3 billion in funding to prevent SAA from having to be liquidated.
But finance minister Tito Mboweni did not make any mention of the allocation in the supplementary national budget, released on Wednesday.
Instead, government is insisting there may be investors waiting in the wings.
Kgathatso Tlhakudi, acting director-general of the department of public enterprises, told Fin24 there were a number of "serious players" interested in investing in SAA. Tlhakudi says these are both local and international aviation players as well as funders of other projects.
Separately, the department of public enterprises said it received “unsolicited proposals from private sector funders, private equity investors and potential airline partners for a new national airline that must emerge from the SAA business rescue process”.
Aviation expert Linden Birns said the statement is vague. "It’s not even said how many of the received expressions of interest are credible or serious.
"Clearly the statement is an attempt to shore up confidence in the business rescue plan ahead of Thursday’s vote", Birns added.
Aviation expert Guy Leitch believes the possibility of a strategic equity partnership is “extremely remote”. “(This is) simply because none of the foreign airlines have any appetite for additional investment funding into Africa at this stage.”
"I’m extremely skeptical about the chances of any private sector investor actually emerging but there is plenty of talent out there that is willing to get involved, roll up its sleeves and run the airline,” Leitch adds.
No names of interested parties have been provided, but two airlines have indicated interest: Ethiopian Airlines and Air Mauritius. But both airlines would have taken a big knock due to Covid-19.
Aviation analyst Desmond Latham says there are a number of hurdles in the way of a possible investment.
“It’s not like in any other industry where you can easily make a sale. This is totally different."
The Aviation Act limits foreign ownership of South African airlines to 25%, a small shareholding that would imply that shareholders have no say in the running of the airline, says Birns.
The article has been updated to reflect the result of the SAA creditors' vote.
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