Gordhan moots SAA-SAX merger

Parliament – Government will explore merging troubled South African Airlines and South African Express and finding a minority equity partner for the new, bigger airline, Finance Minister Pravin Gordhan announced on Wednesday as he tabled the 2016 budget.

“We do not need to be invested in four airline businesses,” Gordhan told Parliament in his budget speech.

“(Public Enterprises) Minister (Lynne) Brown and I have agreed to explore the possible merger of SAA and SA Express, under a strengthened board, with a view to engaging with a potential minority equity partner, and to create a bigger and more operationally efficient airline,” he added.

Gordhan sounded a firm warning that the State needed to stop bailing out struggling state-owned companies and reiterated that those that no longer served a clear need, would be phased out.

But it was SAA he singled out for mention and for urgent action.

“Some are in perpetual financial difficulties. So we must take decisive steps to ensure that they are effectively governed and that they contribute appropriately to the attainment of the National Development Plan.

“Firstly, as President Jacob Zuma has indicated, entities that are no longer necessary should be phased out. The resources raised or saved will be redirected to the balance sheet of SOCs that should grow.”

The airline has made headlines for months, not only for its ongoing losses – with finance managers stating flatly in a leaked internal memorandum that it was trading recklessly – but for a bitter political battle between its chairwoman Dudu Myeni and Treasury.

In December, days before he was fired by Zuma, former finance minister Nhlanhla Nene reportedly vetoed plans by Myeni to renegotiate the terms of a complex lease deal with Airbus which had threatened to see the European aircraft-maker impose heavy penalties.

SA Express last March received a five-year R567 million guarantee from the state and last week decided to ask government for funding support to replace its ageing fleet.