Kevin O'Toole/ZIMBABWE
African airlines have begun the new year with preparations for a renewed round of privatisations. The main event is the planned sale of South Africa Airways (SAA), but there is a growing impetus throughout the region taking in Air Zimbabwe, Air Madagascar and Air Uganda.
South Africa made the first moves towards the sale of its flag carrier at the end of 1997, with a timetable which should see the sale largely completed this year.
The next immediate step is to establish SAA as a free-standing limited company with its own board, rather than a division of its parent, the Transnet state holding company. That target is due to be completed by the end of March.
Following the pattern laid down by the recent privatisation of domestic carrier Sun Air, the search will then begin for an investment partner, almost certain to be a major international airline. German national carrier Lufthansa is widely tipped as a likely front runner, given its existing links with SAA and the offer of entry into its global-alliance network.
British Airways, with its American Airlines alliance still pending, is another leading candidate, although it is unclear how this would fit with the UK airline's existing co-operation with Comair, the South African regional which now operates under the BA-Comair name. Comair became SAA's most serious domestic competitor after winning the bidding for Sun Air. Virgin Atlantic Airways' Richard Branson also expressed an interest in SAA, after dropping out of the Sun Air competiton.
The bidding, to be handled by recently appointed financial advisor Merill Lynch, is expected to be complete by around October.
As yet, there is no official agreement over how many shares the Government will put up for sale, but informal estimates suggest that a trade partner would be offered around 20-35%. Another 10-15% is likely to go to staff and 15-20% reserved for a black-empowerment grouping, set up to encourage economic ownership among the country's previously suppressed majority. A further stake could go to a South African investment institution, although a flotation is believed still to be some way off.
The prospect of a re-emergent SAA (including its east-African Alliance venture)and the fall-out from worldwide consolidation appears to be galvanising other African countries in the region to take action. Encouragement has also come from the success of the Kenya Airways flotation - Africa's first major airline privatisation - which started two years ago with KLM taking a 20% stake in the carrier.
Most within the industry expect sub-Saharan Africa to emerge from consolidation with no more than three major international hubs, backed by links to the emerging global alliances. Johannesburg has a claim to one and Kenya Airways has set about building another with KLM around Nairobi.
Sassy N'Diaye, external-relations director for Africa within the International Air Transport Association, goes further, with warnings that consolidation over the next five or ten years may leave less than five international carriers out of the present 30. He adds that, while privatisation is being seen as a universal panacea, there are still few African carriers which are in a position to be put up for sale.
Renewed preparations are going ahead nevertheless. Air Zimbabwe began preparing the group last year with the appointment of Brendan Donohoe as the new chief executive officer and, by year-end, the setting up of the airline as a limited company.
So far, the corporatisation is in name only and it will not be until around April, when the politicians thrash out the details of how assets and personnel are to be transferred into the new company. Donohue says that, if the carrier can return to profit, full privatisation could follow "in a couple of years".
Others hoping to follow suit include Air Uganda, now in the process of appointing advisors for privatisation, while the Madagascar Government is in the final throes of selecting a French consultant in its move towards a flotation for its national carrier. Air Madagascar's aim is to complete privatisation, now 90% state owned, by mid-1999.
Source: Flight International
