South Africa - Airlines Update

As South Africa ushers in a "new era", here is a review of the state of play in the South African market.

South African Airways: The new CEO has completed an initial situation analysis. Jurana said that even with a government injection of R10 billion expected in March, SAA would remain under-capitalised with over R9 billion in negative equity, outstanding debt of R13.8 billion and rising, and with loans to domestic lenders and the US’s CitiBank of R4 billion due by March 2018. He said that the loss for 2016/7 was R5.6 billion and not the R4.6 billion previously forecast (or an even earlier forecast of R2.8 billion). Revenue came in at R14.5 billion, nearly R1 billion lower than the budgeted R15.4 billion. All domestic routes are losing money.

SA Express: State-owned airline South African Express has been unable to satisfy the auditor-general that it can continue operating as a going concern for the next 12 months. This was the reason given by Public Enterprises Minister Lynne Brown for the airline’s failure to table its annual financial statements for the 2016-17 financial year in Parliament before the end-September deadline. The airline tabled only its 2015-16 financial statements in the past few weeks. The loss-making airline has already faced an application for liquidation by a creditor, which has been withdrawn.

Mango: The third state-owned airline is adding more capacity, and picking up some of SAA's routes domestically. They are believed to be operating 9 aircraft.

Airlink: Airlink is privately owned and does not publish results, but it is seen to be continuing to grow, and is in the process of introducing EMB190 aircraft. The route network continues to grow and is a balance between thin domestic routes and medium regional routes. Airlink is seeking to acquire Safair domestic operations.

Comair: Comair [JSE:COM] issued its annual financial results on Tuesday, reporting a 54% increase in profits to R297m and a 28% increase in cash generated by its operations.
Comair operates under its low-cost airline brand, kulula.com, as well as under the British Airways livery, as part of its British Airways license agreement. Income generated by its non-airline brands now constitutes 20% of its earnings.

Safair: Safair is one of South Africa's oldest operators. The low-cost operation, FlySafair, is a recent launch. Now operating 9 aircraft domestically, and reportedly profitable. The target of merger talks with Airlink.

Cemair: A second tier operator operating thin routes.

Fastjet: Based in Johannesburg and operating regionally. Fastjet Plc will begin flying from Mozambique this year and expects to commence internal South African services in 2018 as it rekindles growth plans put on hold as losses mounted. With the operating loss down 57 percent in the first half and break even forecast for the fourth quarter, Fastjet is ready to revive its pan-African ambitions, aided by a $44 million fundraising, about one-third of which will come from shareholder Solenta Aviation Holdings, it said Friday.

Federal: Federal Air is the market leader in Southern Africa in Air shuttle services and operates daily flights to all the top game lodges and reserves in the region.