The South African government has decided to discuss the merger all three of the nation’s airlines, South African Airways, low-cost carrier Mango and regional carrier SA Express. This merger would have clear benefits for all three airlines but would also come with some risks.
What are the details?
The South African government is set to consider a major merger between its three government-owned airlines, as reported by Business Tech SA. The airlines on the table are:
- South African Airways, the nations international and domestic flag carrier
- SA Express, a regional carrier that links remote towns and cities, as well as some international destinations.
- Mango Airlines, the countries low-cost-carrier
All three carriers are actually fully independent but are funded by the government. The new proposal, prepared by the Department of Public Enterprise, was presented to parliament last Wednesday the 11th of September.
This is great news for South Africa Airways and SA Express, both of which have received government bailouts in recent months. SA Express ran out of cash in August and was forced to ground its entire fleet until the government provided an additional R300 million (20.5 million USD).
What are the benefits?
For one, only having one corporate structure for all three airlines will be a huge cost-benefit for the government. They will need to pay fewer wages (with fewer executives), maintenance can be combined, and each airline can borrow capacity from another if needed.
Additionally, with a bigger fleet and more market presence, the airline will have more power to negotiate a better deal with suppliers. This could lead to a reduction in costs and a renewed focus on getting out of debt.
Speaking about the possible merger to Business Tech SA, interim CEO of SA Express Siza Mzimela mentioned she “fully supported the integration of the airlines, but what is of critical importance is how the merger is put together”
What are the risks?
With the airlines not exactly performing the best at the moment, linking them together also has the potential to make the house of cards even shakier and put the entire venture at risk.
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With an unfortunate history of corruption, this new entity will have to be super vigilant to ensure that it doesn’t become bloated and allow funding to slip through the cracks.
What would this mega-airline look like?
The proposal has not actually suggested merging all three airlines into one airline, but rather incorporating the governance and the way they operate into one entity.
However, if they do become one unit, they will have a combined fleet of:
- SA Express – 24 aircraft
- South African Airways – 47 aircraft
- Mango Airlines – 15 aircraft
- For a total of 86 aircraft flying to a total of 59 destinations.
What do you think about this potential merger? Is it enough to save the airline? Let us know in the comments.