How hollow is Solidarity SAA's victory?

At a press conference on July 10, the Solidarity trade union announced that it had suspended its plans to file a petition for company salvage by the national carrier [19659002]. The CEO of Africa Airways (SAA), Vuyani Jarana, agreed to immediately start looking for a strategic partner for the troubled airline

before the SAA would first be restored to the profitability before introducing a partner In 1965, Connie Mulder, director of the Institute of Solidarity Research, declared that the government was pbading from an "ideologically rooted position" of centralism to privatization, presumably under the threat of the pending judicial application of Solidarity

. that one of the super-connectors, the Gulf airlines, or an African airline like Kenya or the Ethiopian airlines could be considered a SEP. The latter would be part of a development strategy of a West African aviation center

He should be a partner who brings his expertise in exchange for an executive control over SAA and "not a or two percent sold to the public Investment Corporation, "said Mulder.

A closer look at what Jarana wrote in his letter to Solidarity shows that he gave high-level general commitments without delay.

Solidarity asked:

to be an immediate priority of SAA to recruit a strategic equity partner for private equity purposes and that a deadline is set for that;

Jarana responded that the SA government and the SAA board have agreed to start for such a partner and propose to share the project plan with Solidarity once it is finalized. "We can project the beginning of the process but we can not guarantee that there will be appetite on the market. We would not be able to meet the deadline for the completion of the SEP process, it depends on the market. "

Solidarity further asked:

" that SAA not be corrected first, after which a SEP would be sought.

In response, Jarana says that SAA management believes that "the shaping of SAA is an important step to make it attractive to potential strategic partners." He continues to say that because of the funding pressure, the government, as a shareholder, SAA's board of directors and management, agreed to start research immediately [19659002] Solidarity asks:

"

Jarana responds:" While this is desirable, it will depend on the structure of the SEP transaction, the extent of private sector participation, and the moment of the conclusion of the SEP transaction as well as the valuation In comment after the press briefing of Solidarity, the spokesman of the SAA, Tlali Tlali, added: "We do not have any details at this time. stadium as to the size of the stake and the start date, should

Jarana told a parliamentary portfolio committee earlier that SAA needs 21.7 billion rand over the next three years to finance this option return to profitability

It seems that e Solidarity says that SAA should find a company ready to fund fully or to a large extent the hope that the turnaround will occur.

SAA's government and board of directors seem to agree, most likely because they can not see what kind of money is flowing to the tax department's SAA. So it is probably his empty pockets, rather than an ideological reversal, that led to the idea that MS research should be accelerated.

Jarana and his management team, however, are not so sure that this is possible …

Transportation economist Joachim Vermooten told Moneyweb that it would be much more effective to to reduce PAC in its current form and to launch a new targeted airline, free from all existing contracts, of excess staff, inefficiency and dependency culture towards the shareholder.

The crucial question for any potential partner would be about the value and the alternative suggested by Vermooten could very well make more sense the fact of investing in SAA in its current form.

To be profitable and compete with peers, SAA needs new aircraft. He can not buy new planes because nobody would lend him money because of his fragile balance sheet. Jarana called it a "catch 22".

Solidarity says that she could still bring the business relief application, if SAA does not stick to the plan. The union admits that it is skeptical of SAA's commitments and will not be surprised if the demand continues into the year

The Executive Director of the Free Market Foundation, Leon Louw, however, rejects the corporate rescue as a viable option for SAA. He said earlier that the magnitude of the amount of money needed (to save the SAA) is so gargantuan that it will never be repaired "and it will certainly never be a company capable of compete in the world of modern aviation ".