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Ethiopian Airlines will weigh stake in debt-ridden SAA

Oct 06 2019 13:00
John Bowker

Ethiopian Airlines Group would consider buying a stake in South African Airways - should South Africa decide to sell equity in the struggling state carrier.

"We are interested in supporting South African Airways," he said in an interview at Ethiopian's head office near Addis Ababa airport.

If South Africa asked Ethiopian to buy a stake, "we would consider it," Tewolde said.

Ethiopian and SAA are already partners in the Star Alliance.

Debt Problem

The group had discussions with SAA's former Chief Executive Officer Vuyani Jarana before his resignation in May, Tewolde said. A deal may involve help with SAA's chronic debt problem, with banks withholding further loans until the airline can present a repayment plan for R9.2bn ($611m) of borrowings.

SAA hasn't yet appointed a permanent replacement for Jarana.

The parlous financial state of South Africa's weak state-owned enterprises is weighing on the economy, with Finance Minister Tito Mboweni having little choice but to allocate additional funds to debt-ridden companies, from power utility Eskom to the South African Broadcasting Corporation.

Ethiopian is Africa’s biggest aviation success story, with main rivals SAA and Kenya Airways struggling with losses and relying on government support. The Horn of Africa carrier has looked to invest in other airlines around the continent, including new carriers planned for Ghana and Zambia.

"We have recently signed a shareholders agreement with the Ghanaian government," Tewolde said.

"Hopefully it will be up and running in the next six months".

Cutting Routes

In contrast, SAA is cutting routes and needs R2bn alone to fund working capital for the remainder of its financial year through March 2020. The airline has been held back by mismanagement and corruption, particularly during the scandal-hit presidential tenure of Jacob Zuma.

African operators now have 20% of the continent's market compared with 60% two decades ago, mainly due to the growth of Gulf-based carriers, Tewolde said.

"It's a continuous decline," Tewolde said.

"If it is not addressed by African carriers -- it may become zero. If that happens it means we are all wiped out".

— With assistance by Nizar Manek

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