Lufthansa, long considered the front runner in the race for a 30% stake in South African Airways (SAA), now appears to be facing a determined combined challenge from Swissair/Delta Air Lines.
The German carrier launched an aggressive public relations exercise weeks ago announcing that, if successful, it would share the 30% stake in SAA with Singapore Airlines.
However Lufthansa's assertion that it was the logical partner for SAA, because of wide-raging codesharing, maintenance, training, catering and information technology agreements between the two carriers, drew the ire of SAA's parent company Transnet. When local press reports put Lufthansa way ahead of competitors British Airways, Virgin, KLM and Swissair, Transnet's managing director, Saki Macozoma, said the race was still wide open and that the Lufthansa bid was "not a done deal."
While Macozoma will not be drawn on who the front-runners are, observers say the Swissair/Delta consortium is "right up there with the major players". Swissair is the lead member of the European Qualiflyer alliance and has a transatlantic alliance with Delta.
Macozoma adds that the corporatisation of SAA, an essential precursor to privatisation in April, is on track for completion by the end of this month. It is now widely accepted that Transnet will conduct a road show for potential investors.
At a recent Frankfurt briefing, Lufthansa said SAA should aim to gain control of a significant slice of Africa's airspace if the Lufthansa-Singapore bid is successful. Friedl Roedig, the chairman of the management board of the Star Alliance, of which Lufthansa is a founding member, said SAA's base at Johannesburg International Airport should become a hub for Southern African states including Namibia, Zimbabwe, Botswana, Zambia and Kenya.
"Thereafter we would like to see SAA's network expand deep into Africa from the south to tie up with our networks coming in from the north, thereby gaining control of most of the skies over Africa," he said.
Roedig is confident of Lufthansa's advantage over other bidders because of the already strong commercial alliance the carrier has with SAA. "Besides the technical and training links already in place, Germany has huge investments in South Africa and a large German population that flies frequently between our two countries." He adds that Lufthansa would not interfere in the running of the airline except to offer managerial and technical training and encourage the advancement of historically disadvantaged workers.
However, if the Lufthansa-Singapore bid fails, Lufthansa believes its future commercial co-operation with SAA will diminish. "In other words there would be no transfer of expertise or extra effort expended on the SAA." said Roedig. Roedig is reluctant to comment on what Lufthansa might be prepared to pay for a 30% stake.
Lufthansa's senior vice-president corporate strategy, Dr Chris Klingenberg, says that the advantages for SAA of becoming a Star alliance partner are enormous. "The airline will become a global player, ensuring its long-term viability [and its] support by international expertise and a worldwide infrastructure." He says that in the two years that Lufthansa has been a member of the Star Alliance, an additional $80 million has been added to annual revenue.
Meanwhile BA's bid for a stake in SAA could be problematic because of its dominance in the South African market. BA has more flights between Cape Town, Johannesburg and London than SAA and local carrier Comair flies BA passengers on a BA franchise to local destinations. "BA's influence in the local and overseas market would almost certainly attract Competition Board interest if it went on to acquire nearly a third share of SAA," says one analyst.
Source: Airline Business
