South African Airways (SA, Johannesburg O.R. Tambo) is debt-free and does not seek further government funding, but it is pursuing a loan facility due to low cash reserves following the failed ZAR3 billion rand (USD170.4 million) investment from the Takatso Aviation consortium, according to chairman Derek Hanekom.

Briefing the Standing Committee on Public Accounts (SCOPA) in parliament on October 22, Hanekom said that in the longer term "it would seriously assist if there were some form of capital injection," which, he added, could be in the form of another equity partner.

However, he said SAA had not budgeted for this for 2025. "It's for the later years; if something transpires, that will obviously be welcomed and will be useful, because it would mean that we would be able to bring forward some of the plans that have been pushed back because of the non-availability of the ZAR3 billion," he explained.

Following three years of negotiations, the late Public Enterprises Minister Pravin Gordhan cancelled the deal with the Takatso consortium to sell a 51% stake in SAA following an upward adjustment of the airline's assets. Takatso would have acquired the majority stake for a ZAR51 (USD2.89) purchase price in exchange for injecting ZAR3 billion in operating capital into the airline over the first two years. In the absence of these funds, SAA has postponed some aspects of its business growth plan, Hanekom said, but did not elaborate.

He confirmed that SAA is engaging with commercial banks "not to get a loan at this point, but a loan facility as a kind of a buffer, because while it is debt-free, the cash reserves are low, and it makes us quite vulnerable. Should there be any shock, we don't have anything to draw on." He said there was a "much more positive approach from the banks" in the light of SAA's stabilisation. While the audit of of SAA's 2023/2024 financial results would only be completed in February 2025, the airline has "ZAR5 billion [USD284 million] in unencumbered property which stands us in good stead for the possibility of this loan facility," Hanekom explained.

Transport Minister Barbara Creecy emphasised the government's openness to finding an equity partner for SAA, warning that the airline risks losing market share without one. She stated that a capital injection is crucial for SAA's sustainability and to support the expansion of its regional and international routes.

Mango update

Asked for an update on the current business rescue process of SAA's low-cost subsidiary Mango Airlines (MNO, Johannesburg O.R. Tambo), SAA CEO John Lamola explained that the "matter is entirely in the hands of the business rescue practitioner" (BRP). In March, BRP Sipho Sono secured Supreme Court approval to continue with the sale of the provisionally liquidated state-owned budget carrier to the Ubuntu Aviation Consortium after Gordhan tried to stop the process after months of delaying a decision on the matter, insisting on more information on the bidder's corporate structure, due diligence performed on the company, and its business plan.

According to Sono's latest update to creditors, the deal is now pending before the Air Services Licencing Council (ASLC), the entity that awards new licences or route authorities. "The BRP will be following up with the Council to request that this matter be expedited in order to bring finality to the matter as soon as possible," he said.

The ASLC is expected to consider the matter at its next meeting, a date for which has not yet been finalised, ch-aviation was told. The domestic and international air services licensing councils are operating again after having halted their work when members, who are part-time appointees, were not paid for performing their duties.

As previously reported, Ubuntu Air Services, backed by tour operator AfricaStay, plans to acquire Mango Airlines as a strategic move to diversify its business. The offer includes a ZAR1,000 (USD56.7) share purchase and ZAR1 million (USD56,755) in share subscriptions, while also taking on Mango's ZAR169 million (USD9.5 million) unflown ticket liabilities, converting them into vouchers over 12 months. The investor plans to inject ZAR30 million (USD1.7 million) for start-up capital and may add ZAR20 million (USD1.1 million) for guaranteed deposits. The proposal includes selling a Mango aircraft engine for about USD3 million to benefit creditors and injecting an additional ZAR100 million (USD5.6 million) to relaunch regional and domestic flights. Once sustainable, Ubuntu may sell 25% of Mango to an international airline for further capital.