South Africa to merge three national carriers
The South African government has begun discussions towards a merger of all three national carriers – South African Airways, Mango and SA Express. The merger is not unconnected with the perennial difficulties of sustaining the three high-capital intensive ventures for profitability.
The South African Airways is the nation’s international and domestic flag carrier.SA Express is a regional carrier that links remote towns and cities, as well as some international destinations, while Mango Airlines is the country’s low-cost-carrier.All three carriers are actually fully independent but funded by the government. The new proposal, prepared by the Department of Public Enterprise, was presented to parliament recently.
Stakeholders described the proposal as a great news for South Africa Airways and SA Express, both of which have received government bailouts in recent months. SA Express ran out of cash in August and was forced to ground its entire fleet until the government provided an additional R300 million ($20.5 million).
For one, only having one corporate structure for all three airlines will be a huge cost-benefit for the government. They will need to pay fewer wages with fewer executives, maintenance can be combined, and each airline can borrow capacity from another if needed.Additionally, with a bigger fleet and more market presence, the airline will have more power to negotiate a better deal with suppliers. This could lead to a reduction in costs and a renewed focus on getting out of debt.
Speaking about the possible merger to Business Tech SA, interim Chief Executive Officer (CEO) of SA Express, Siza Mzimela, said that she fully supported the integration of the airlines, but “what is of critical importance is how the merger is put together”. With the airlines not exactly performing the best at the moment, linking them together also has the potential to make the house of cards even shakier and put the entire venture at risk.
With an unfortunate history of corruption, this new entity will have to be super vigilant to ensure that it doesn’t become bloated and allow funding to slip through the cracks.
The proposal has not actually suggested merging all three airlines into one airline, but rather incorporating the governance and the way they operate into one entity.
However, if they do become one unit, they will have a combined fleet of: SA Express – 24 aircraft; South African Airways – 47 aircraft, and Mango Airlines – 15 aircraft. For a total of 86 aircraft flying to a total of 59 destinations.They might even become one of the biggest airlines in Africa, sliding in between Ethiopian Airlines with 117 aircraft, and Royal Air Maroc that has 59 aircraft.