Consolidation plan for SAA, SA Express and Mango to be submitted to Cabinet next week

A proposal for the consolidation of the three state-owned airlines, namely national carrier South African Airways, its low-cost subsidiary Mango and regional carrier SA Express, is expected to be submitted to Cabinet next week, a representative of the Department of Public Enterprises told Parliament on Wednesday.

This was during a briefing SA Express made to the Select Committee on Public Enterprises and Communications.

During the briefing, the DPE, under which SA Express falls, told the committee that together with National Treasury, it had already in 2017 carried out a study into the consolidation of the three state-owned airlines. The study concluded that it would be beneficial to consolidate the airlines.

One central hub

According to the department, the commercial arrangement according to which the airlines currently operate is not working. Most of the benefit could be derived from looking into how SA Express and SAA could work together, the department said.

The study found that it would be helpful to create one central decision-making point instead of having competing commercial interests.

Cabinet would have to decide how the consolidation would be carried out. Furthermore, Cabinet would have to decide how much additional funding would be needed for such a consolidation process, especially since various regulatory and government processes would have to be followed in order to make it happen.

The department told the committee that the first step in process was the transfer of SAA from Treasury to the DPE.

SA Express interim CEO Siza Mzimela told the committee that the airline was already preparing for an integration.

"We are highly supportive of the integration, but it is about how it is done so we do not shift one problem to another. But it is definitely something we support," she said.

SA Express received re-capitalisation funding of R1.2bn in February 2019. This was ring-fenced to pay bank loans. The airline has further been advised that a re-capitalisation amount of R300m was approved by National Treasury in the meantime.