Hilka Birns/CAPE TOWN
Shareholders at Sun Air have decided against a merger with rival South African carrier, Comair, which already owns 25% of the recently privatised state-owned airline.
Sun Air's major shareholder, the Rethabile black empowerment group, says it is unwilling to relinquish its foothold in the airline industry at a time when Sun Air expects a R36 million ($5.3 million) profit for the current financial year. This follows a R14.5 million profit for the year to March.
A merger would have seen Rethabile selling its stake in Sun Air to Co-ordinated Network Investments, a rival empowerment group, which in turn holds a 19.25% stake in Sun Air in addition to 9% of Comair shares. Rethabile would have retained 6% of Sun Air, but would have been left with little influence over the carrier's management and business development strategies, says the group's director, Sheikh Makado.
"While a merger would have saved R100 million in combined operational costs, it would have diminished our hold in the airline industry. We don't share the same vision. Comair is our competitor and Sun Air will continue to develop its own brand", he says.
Despite lifting earnings by 245% to R60 million for the year to the end of June, Comair, which achieved a listing on the Johannesburg stock exchange in July, has now seen its share price drop by more than half its value since taking the listing.
Analysts say Comair, as the only airline listed on the local stock exchange, suffered from sentiments strongly influenced by the poor performance of its biggest rival, state-owned South African Airways, which is still struggling to pull out of the red.
Source: Flight International
