Johannesburg – In his 2016 budget speech on Wednesday, Finance Minister Pravin Gordhan boldly announced that no further bailouts would be granted to any state-owned enterprises: sad news for the national carrier airline which was banking on a R5-billion line of credit needed to keep its head above water.
He added that the government has no need to be invested in four airlines [sic] and that he would be working together with the Minister of Public Enterprises to explore the possibilities of merging SAA and SA Express with a new “strengthened board” and a potential minority investor.
Elmar Conradie, CEO of FlySafair said that they would have no interest in being that equity investor, explaining that the underlying business model of SAA is not consistent with the strict low cost approach of their model.
Domestic air travel in South Africa has experienced a remarkable turnaround in the last 18 months. Weekly domestic seat capacity at present is 400 000 seats, and airfares are lower than they were five years ago.
“We believe it’s never been this cheap to fly,” adds Conradie.
“These lower fares have been great for the public and the market has grown by as much as 12 percent,” said Conradie. He added that a survey of just under 3 000 FlySafair customers over the festive period indicated that 15 percent of their passengers experienced their first flight ever over this recent summer holiday.
“We would, however, buy Mango; although obviously it would need to be at the right price,” Conradie said, building on Minister Gordhan’s statement about government having no need to be invested in four airlines [sic].
Conradie further explained that Mango’s fleet and operating model was closer to FlySafair’s low cost approach, and would be a more natural extension to FlySafair’s successful business model.
He added that operating a larger fleet would afford FlySafair the opportunity to enjoy even larger economies of scale – and through this, potentially offer even lower fares to the flying public. He also noted that government could then channel these funds to bolster the positive 2016 budget presented.
Adapted from a press release for IOL