Does Ethiopian want a slice of South African Airways?
Since news of South African Airways being privatized and sold broke, rumors of potential buyers have abounded. One potential buyer frequently cited as having an interest is African powerhouse Ethiopian Airlines. Simple Flying caught up with acting Chief Operating Officer Esayas WoldeMariam to find out if there’s any truth to this rumor.
Ethiopian’s relationship with South African Airways has been close for some time. Last year, before SAA entered business rescue, the two airlines had proposed a joint venture, which was presented to the SAA board in June 2019. The proposal would see management delivered by executives from both airlines, as well as consolidation of staff and routes.
The proposal was put on the back burner after the airline went into business rescue, but since then, rumors have abounded regarding Ethiopian’s interest in the struggling airline. Most recently, it has been floated that Ethiopian Airlines is one of the investors in discussion with the South African government to buy SAA. Simple Flying asked acting Chief Operating Officer Esayas WoldeMariam if Ethiopian is indeed one of the buyers. He told us,
“Well, people are saying that all kinds of things about South African Airways, Air Mauritius, Air Madagascar and others. The fact of the matter is that we are capable, and we are desirous. “The other thing is that African cooperation is always good. It’s good for SAATM and for the Continental Free Trade Agreement and Single African Skies, so it’s in line with that. So, if there is a vacancy appearing, then definitely will be part of it.”
While that’s not definitive confirmation that Ethiopian is one of the potential buyers of SAA, it’s not a no either.
Ethiopian Airlines is no stranger to investment. It already holds stakes in ASKY Airlines, Ethiopian Mozambique Airlines, Malawi Airlines and Tchadia Airlines. Its strategy is clear – to build a network of feeder airlines covering as much of Africa as possible, with Ethiopian providing the hub and spoke connection to the rest of the world.
A stake in South African Airways would be a huge compliment to this strategy, giving Ethiopian a foothold in the biggest African economy and a second hub for funneling traffic internationally. The one stumbling block is the South African law that prevents foreign investors from holding more than 25% of local airlines.
South African Airways hasn’t turned a profit in almost a decade and has been in special administration since the end of last year. The government decided to stop funding the airline in April. Since then, its business rescue practitioners have repeatedly warned that there is a strong likelihood of the airline being liquidated.Subsequently, the airline has returned aircraft, received another bailout from the government, and has had a rescue plan approved. Hopes are high that the new SAA could be ready to fly by the end of the year, but it needs half a billion dollars of investment to get off the ground.
Should it secure the investment it needs, what else would it take to see it become a profitable entity? Esayas believes that it has strong potential to be a great airline, as long as the South African government allows it to be run correctly. He said,
“South African Airways has been such a great quality airline. It’s sad to see it being challenged in this way. [Its future] all depends on the investors and the government. If they put in the required money to revamp it, and then to allow it to be run with complete administrative autonomy within the industry without any interference from the government … if they do this, it is definitely going to come back.”
The South African government is reportedly in talks with as many as 10 potential investors. Four proposals are being seriously considered. Whether one of those proposals comes from Ethiopian Airlines remains to be seen.
