Takatso deal in doldrums as 20 route licences are withdrawn
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SAA used to have 42 aircraft to service its routes, but they have since been whittled down to 9 aircraft, which has left the deficit of routes they could not fly. Picture: Damaris Helwig.
THE Takatso Consortium deal is a millstone round South African Airways’s (SAA’s) neck as the International Air Services Licensing Council revoked 20 of the airline's international routes and has asked hard questions about the nature of Takatso.
Sources close to the issue said the council revoked 20 of SAA's 52 international licences because they could not prove capacity to service the aircraft.
An SAA insider said the airline is ceding the routes to players with the capacity to serve them.
Given the sensitivity around the matter, none of the sources contacted were willing to put their names on record.
The matter at hand involves the council's concern about SAA not servicing allocated routes, which by lapse after three months, which SAA has not been able to do for the last two years after it was plunged into business rescue.
Members of the portfolio committee on public enterprises expressed concerns, quickly dispelled by SAA, that the airline was in danger of liquidation or expropriation.
Acting CEO Professor John Lamola rushed out of a Parliamentary presentation to attend the council's summons to explain SAA's position.
Insiders said the council needed SAA to describe the nature of the deal presented by Takatso and they were concerned that a 51% stake by Takatso contravened a regulation that stipulates that 75% of the shareholding has to remain in the country.
Neither the Department of Public Enterprises spokesperson Richard Mantoe nor SAA spokesperson Vimla Maistry would comment yesterday.
A source who following the meeting said SAA had 20 out of 52 licences revoked without negotiation as it had not serviced them in more than three months, dating back to when SAA entered business rescue.
"The Takatso consortium business was hard to explain. The council could not grasp the issues about Takatso owning a stake in SAA,” the source said.
SAA had to convince the council that Takatso was a viable deal awaiting regulatory approval.
SAA, at the height of operations, had 42 aircraft to service its routes, but they have since been whittled down to nine aircraft, which has left it with routes it cannot service.
An SAA insider said the airline would not commit to the extra routes and would cut its nose to spite its face if it did so.
“Why would we need to fly all those places when we have limited capacity,” the source said.
Members of Parliament, under the auspices of the the public enterprises portfolio committee, last week grilled SAA on what would happen if the Takatso deal fell through, and if the airline would not be back with a begging bowl for a government intervention.
The airline was recently recapitalised to the tune of R10 billion by the government, with R7.4bn going to service debt, while R2.6bn was kept for working capital.
In that year, SAA had a R29bn turnover, with operating costs at R32bn, earnings before interest tax depreciation and amortisation at R2.6bn and an overall loss of R5.4bn.
The Department of Public Enterprises and SAA have given March next year as the time by which all regulatory hurdles, now including the Competition Commission, the Competition Tribunal and the council, should be cleared for the Takatso consortium as a majority stakeholder in the carrier, before it can pay its R3bn contribution.
Acting Director General of the Department of Public Enterprises, Jacky Molesane, and Deputy Director General Melanchthon Makobe as well as SAA's interim Chief Financial Officer Fikile Mhlontlo told Parliament's public enterprises committee that government had done sufficient due diligence on Takatso's financial capability, and that the only reason they had not made a financial contribution was the clearance of the regulatory hurdles which should be done by the last quarter of the 2023 fiscal year.
"They have the money. In fact they want this done sooner than later. In any transaction, money will not flow until it gets the green light. We are waiting for the approvals and regulatory hurdles and thereafter there will be change of ownership. We expect to see the flow of money into the airline after that," Molisane said.
This was at the presentation of the much delayed SAA's results for the 2017/2018 year which were put on halt after the airline went into a tailspin and which culminated in the business rescue process.
Aviation analyst Puthego Mojapili said SAA was hard pressed to explain itself to the council on why it had not utilised the routes after the mandatory three months, after it stopped flying.
Mojapili said the airline had to give an update after three months about its capacity to fly the routes, after which they could be taken away.
BUSINESS REPORT