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'Out of ICU': Gordhan says Takatso deal will be concluded soon, as SAA launches Brazil route

Public Enterprises Minister Pravin Gordhan

Public Enterprises Minister Pravin Gordhan

27th October 2023

By: News24Wire

  

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The South African Airways-Takatso deal is "pretty much still on," with hopes that it will be concluded either later this year or early next year, according to Public Enterprises Minister Pravin Gordhan.

The minister was speaking at an event on Thursday night in Cape Town that marked the launch of SAA's first intercontinental flight - since it exited business rescue in 2021. This development has been two years in the making.

The flight to São Paulo, Brazil, takes off from Cape Town International Airport on Tuesday, 31 October, and a second one will be from OR Tambo International Airport in Johannesburg on Monday, 6 November.

Up until this point, the airline has had nine international routes, all within the African continent, including Mauritius.

"SAA is, in many ways, if you take our recent history, an instance of an entity rising from the ashes of state capture like a phoenix. A few years ago, we thought that having done all the damage that has been done to SAA, it wouldn't survive," Gordhan said.

While there were many who thought liquidation would be the best way to deal with the airline's future, today it is "still alive" and has been "brought out of ICU," Gordhan added.

The minister continued to express optimism in the future of the entity, providing that a deal with strategic equity Takatso is concluded. "That should be concluded either late this year or early next year."

The deal was announced in June 2021 and would see Takatso, a consortium originally formed by infrastructure fund manager Harith, Global Aviation and Syranix, buy a 51% stake in SAA. The deal would bolster SAA with a R3-billion cash injection over two years and allow it to expand routes. The consortium will not take on legacy debt.

But, the transaction has not yet been finalised.

Gordhan told journalists that there were a number of regulatory hurdles that took longer than expected. One of these being that the competition authorities approve it – a process that took 10 months.

The Competition Tribunal in July approved the transaction, with certain conditions. This includes a moratorium on retrenchments and that the consortium's minority partners, Global Aviation and Syranix, exit the deal. This is because Global Aviation and Syranix own low-coat airline LIFT, and the tribunal found this may adversely impact competition in the domestic passenger market.

Gordhan said that the valuation of property also had to be done again after the Covid-19 pandemic. This process has also now been completed. Currently, the business is being valued.

"Yes, the deal is pretty much on still, but these are all the hoops we have to go through, and we want to conclude it as soon as we can," Gordhan said.

Asked about the remaining legacy debt, which could impact the finalisation of the deal, Gordhan said there is no legacy debt.

When SAA exited business rescue, the balance of its debt was transferred to a receivership. This vehicle was intended to ensure the debt is paid over three years. According to CEO John Lamola, the receivership has been paid. "That legacy contractual monies have been paid," he said.

News24 understands the entity has no interest-bearing debt.

What the airline is paying off is liabilities from unflown tickets, Lamola explained. He did not give an amount.

SAA has not tabled financial statements since 2018 – which Gordhan said is linked to state capture when documents were destroyed and no proper records were kept. The current SAA team has had "great difficulty" in finding documents needed as evidence for the financial statements submitted to auditors, he explained.

Why Brazil?

Lamola said that the new São Paulo route is is coming off a good foundation. "The foundational base is that SAA has come out of business rescue debt-free," said Lamola. This makes it easier to lease aircraft. Secondly, the airline had been operationally profitable. 

Lamola said that in choosing São Paulo, thorough studies were also done on routes to London, New York, Perth and Frankfurt.

"São Paulo has come up as the safest and the most profitable one," he said.

Every route chosen goes through a number of checks internally and with the board. International routes also need to be run by the minister and National Treasury.

 

Edited by News24Wire

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