A deal between Ethiopian airline group and SAA may involve with helping SAA chronic debt problem with banks, which are withholding further loans
Ethiopian Airlines Group to consider buying a stake in South African Airways (SAA) should South Africa decide to sell equity in the struggling state carrier.
Since 2011 South African Airways has not made profit, the airline delayed the release of its annual earnings due to its precarious financial state.
Group Chief Executive Officer of Ethiopian Airlines, Tewolde GebreMariam said that despite the African National Congress saying it would consider selling equity in the airline, there has been no visible strategy for such a plan.
“We are interested in supporting South African Airways,” he said in an interview at Ethiopian’s head office near Addis Ababa airport.
He added that if South Africa asked Ethiopian to buy a stake they would consider it. Ethiopia and SAA are already partners in the Star Alliance.
Tewolde said that the group had discussions with SAA’s former Chief Executive Officer Vuyani Jarana before his resignation in May.
A deal between Ethiopian airline group and SAA may involve with helping SAA chronic debt problem with banks, which are withholding further loans until the airline can present a repayment plan for 9.2 billion rands ($611 million) of borrowings.
After SAA’s Chief Executive Officer Vuyani Jarana resignation the airline has not found his replacement.
The appalling financial state of South Africa’s weak state-owned enterprises is weighing on the economy. Which has led to the Finance Minister Tito Mboweni has little choice but to allocate additional funds to debt-ridden companies, from power utility Eskom Holdings to the South African Broadcasting Corporation.
Ethiopian airline is Africa’s biggest aviation success story, with SAA and Kenya Airways being its main rival, which is struggling with losses and relying on government support. The Ethiopian carrier has looked to invest in other airlines around the continent, including new carriers planned for Ghana and Zambia.
Tewolde said that they have recently signed a shareholders agreement with the Ghanaian government and are hoping it will be up and running in the next six months.
SAA is cutting routes and needs $133.8 million alone to fund working capital for the remainder of its financial year through March 2020. The airline has been affected by mismanagement and corruption.
Source: The Exchange