Roger Makings
The partial privatisation of South African Airways will go ahead as planned, despite a series of setbacks which threaten to delay the deal.
The Minister of Public Enterprises Stella Sigcau under whose department SAA falls, says that although the first deadline has been missed, the 31 October target for naming a foreign equity partner will still be met. However, some industry sources see this as highly unlikely, predicting the deal 'could slip over into 1999'.
Plaguing the sell-off are SAA parent company Transnet's massive debts, which exceed Rand 20 billion (US$4 billion). SAA also owes Transnet Rand 2 billion in an interest free loan. Other splashes of red on the airline's books include foreign and domestic loans of Rand 1.7 billion and current liabilities of Rand 2 billion. SAA recorded a Rand 323 million loss last year. The airline was expected to lose a further Rand 300 million in the financial year ending March 1998, despite the launch of Operation clean-up, which was to have saved SAA some Rand 170 million bythe end of March.
Transnet and the government have each proposed a plan to rescue the carrier. The Department of Finance has tabled a proposal that seeks to limit the impact of the deficit on budget targets while Transnet suggests setting up a special purpose financing vehicle that would house part of the deficit as well as other debts and assets.
The Department of Public Enterprise and Transnet's Kennedy Memani, an adviser to Sigcau, both deny, however, that the new proposals will delay the 49 per cent sale of SAA. 'We are all still working towards the October deadline for the announcement of a foreign equity partner and there is optimism that it can still be achieved,' says an airlinespokesman.
Accumulating the problems plaguing the airline is labour's recent rejection of management's turnaround business plan, adding to doubts held by the board of Transnet over the plan. Following the rejection of the restructuring plan, which involves the retrenchment of some 3,000 employees out of SAA's 11,000 strong workforce, and over which unions claimed not to have been consulted, SAA has appointed consultants Roland Berger to fashion a new business plan.
Memani says that the revamped business plan will spell out the short to long-term strategies regarding the airline's markets, fleet replacement and alliances as well as technical and financial matters which would then be presented to labour for discussion.
Meanwhile there is a growing interest by foreign airlines in a stake in SAA. Continental Airlines, through its association with KLM and Northwest Airlines, has announced that it will bid, joining British Airways and Singapore Airlines, in partnership with Lufthansa, which all want to develop their networks within Africa.
Source: Airline Business
