The plan has been months in the making, but seems to have stalled mid-flight. Here’s how a potential SAA merger with Ethiopian Airlines would work.
It has been revealed that one of the plans to save the nosediving South African Airways (SAA) business is to merge it with the wildly-successful Ethiopian Airlines, in a bid to grow the West-African travel hub together.
SAA: Merger with Ethiopian Airlines “on the cards”
The proposals were made by former SAA CEO Vuyi Jarana. His report, titled “The Investment Case for South African Airways”, suggests that merging with another airline is the SA carrier’s best chance of survival.
Both the UAE-based Emirates and German operator Lufthansa have been identified as potential partners, but documents seen by the Sunday Times highlight the importance of “consolidating air traffic through Africa” – making Ethiopian Airlines their preferred choice.
“Given the thin margin nature of the airline business, under government control or under government rules, it is unlikely SAA will deliver better margin performance. Government should consider exiting the airline business,”
“The biggest opportunity is to grow the West Africa hub together where traffic throughout Africa is consolidated, before connecting to the US and Canada.”
Government could dump an SOE
It’s understood that this plan of action would see the government offload SAA from its beleaguered roster of state-owned entities, providing a massive relief for the government. More than R40 billion has been spent on bailouts for the business, yet nothing seems to be good enough for the flailing airline.
This wouldn’t just be a case of palming-off the airline and its workers, however. Ethiopian Airlines would actually sublet aircraft into the joint venture and provide pilots, while SAA provides cabin crew. Avoiding retrenchments was a big part of the airline’s strike last month, and this solution seems to be a viable one that protects jobs.
Whoever inherits the hot mess of SAA will have to deal with recently-increased wages – up 6% after industrial action. They will also have to find a way of overcoming the operational challenges that have made South African Airways one of the least trustworthy airlines in the country. As the national carrier, a reputational facelift is required.