South African Airways is set to pass into majority private ownership for the princely sum of US$3.16. The airline's new majority owners, the Takatso Consortium, are set to purchase a 51% stake from the South African Government pending approval and finalization. But what looks like the opportunity to become an airline mogul for loose change does have some downsides - it is going to cost someone a packet to get South African Airways back to form.

Details of the South African Airways sale revealed

South African Airways has lost money since 2011. The airline struggled on several fronts before the pandemic, but COVID-19 saw South African Airways grounded and enter into provisional bankruptcy protection. Last year, after spending billions to bail out the airline over the years, the South African Government confirmed they would be offloading the national carrier.

Takatso, made up of local aircraft wet lessor Global Aviation and Harith General Partners, a pan-African investor in African infrastructure, were confirmed as the new majority owners of South African Airways last June. But it was only late last week that the South African Government announced the pending deal's details.

A330-300 South African Airways on ground
South African Airways is down to flying a handful of local routes. Photo: Airbus

What the South African Government says the privatization will bring

Admitting the national carrier has struggled over the past decade due to "gross mismanagement and corruption, and state capture and abuse of South African Airways' resources," Public Enterprises Minister Pravin Gordhan says in exchange for the 51% stake, the Government would position the airline for future financial and operational success and bring in reliable, competent and commercially experienced aviation specialists to operate South African Airways.

"Government supported the need for a new, restructured airline and the need to mobilize funding from various sources, including from potential equity partners. This was deemed as the only realistic path for the emergence of a sustainable and competitive airline that can provide an integrated domestic, regional and international services, could emerge," Mr Gordham says in a statement.

"The finance for operating a "New SAA" will come from the Takatso Consortium. Government will not be contributing any finance to the new airline. However, as pointed out below, Government will receive dividends as a preferential shareholder. This would benefit South Africa as a whole."

A330-300 South African Airways Take off
With SAA currently grounded, Emirates does not want to lose momentum in the country. Photo: Airbus

Denials the SAA deal will cost the South African Government down the track

Mr Gordham says the new majority owners will tip R3 billion (US$186 million) into South African Airways over the next two years. But there are also claims that the South African Government (which is retaining a 49% stake) will have some future funding responsibilities. South Africa's National Treasury says in an internal document now doing the rounds that Takatso retains the right to decide whether any ongoing liabilities need to be paid by the Government.

"The strategic equity partner may assume very minimal shareholder risk for the acquisition of a majority shareholding a the purchase price of 51 rand," the Treasury memo reads.

But Takatso's Chairman, Tshepo Mahloele, says this is not the case. "There is no further need for injection into the new SAA going forward by government of any sorts," he told South African media outlets. That's why it took a bit longer to ensure that going forward, we have a structure which will enable the state to still keep a share in this business going forward."

Whoever pays, it's going to take more than $3.16 to resurrect South African Airways. The airline is down to a handful of flights on just a couple of routes. Like most private equity interventions into the airline industry, Takatso's longer-term plan is to list South African Airways on the Johannesburg Stock Exchange. But the national carrier will need to be knocked into shape before that happens.