ROGER MAKINGS JOHANNESBURG
A bid by South African Airways to acquire a controlling stake in domestic rival Sun Air looks set to end in failure. The government is expected to refer the proposed deal back to the shareholders.
In August, SAA announced that it had secured a deal with the board of formerly government-owned Sun Air, offering a financial package which would result in Sun Air's closure.
Shortly after the announcement the government said that certain conditions of sale had been violated and it was not prepared to write off the R20 million ($3.3 million) still owed by shareholders, as proposed under the agreement.
The government is now considering its options. These include a proposal by a consortium of foreign and local companies, including Virgin Atlantic, backed by labour and an association of Sun Air staff determined to rescue the airline.
SAA chief executive Coleman Andrews scoffs at the move. "Only a total fool would invest the R300 million that would be required to restart Sun Air," he says. Previous estimates were put at R150 million.
The botched deal - neither shareholders nor SAA had obtained government permission for the take-over prior to the announcement of the agreement - saw the return of 11 aircraft to lessors and banks, staff dismissed and the airline effectively closed without any money changing hands.
SAA's offer to purchase is believed to have been valid until mid-September after which it would be free to walk away from the deal without having paid anything, thus achieving its main objective of eliminating competition.
Sun Air's majority shareholder and black empowerment consortium, Rethabile, existing shareholders, domestic carrier BA/Comair and Consolidated Investments Network, are left without an airline or a buyer and several hundred staff out of jobs.
Rethabile member and Sun Air executive director Sheiks Makhado says: "All hell will break loose if the Sun Air-SAA take-over is not sanctioned by the government." He adds that it was up to SAA to get government approval for the take-over.
Rethabile has instructed lawyers to seek enforcement of the agreement with SAA over its purchase of a 75% stake in the now-defunct airline for around R23 million. The consortium says SAA was to take over the liabilities of Sun Air, including the R20 million second tranche owed to the government by existing shareholders.
When Sun Air was privatised three years ago, BA/Comair's purchase of a 25% stake left Rethabile with 35% and Comair and CNI holding 44%.
Source: Airline Business
