The crucial process to find strategic equity partners for SA Express – especially those with financial muscle and a lot of patience to turn around the bankrupt state-owned airline – has hit a snag. 

Air Mauritius expressed interest in acquiring an undisclosed stake in SA Express and started formal discussions in February 2020 with the airline’s business rescue practitioners.

But any investment by Air Mauritius into SA Express will probably fail to take off as the Port Louis, Mauritius-headquartered airline announced on Wednesday 22 April that it has entered into voluntary administration, known as a business rescue process in SA.

Like other airlines around the world, Covid-19-related travel restrictions have made it difficult for Air Mauritius to meet its future financial obligations because most of its planes have been grounded since 22 March.

In early February, Air Mauritius approached the SA Express rescue practitioners, expressing interest in the airline. In SA Express, Air Mauritius saw an opportunity to expand its flight routes further into the African content, as SA Express operates regional flights in Namibia, Botswana, Zimbabwe, Zambia, and the DRC. Air Mauritius flies to 22 destinations across four continents.

The SA Express rescue practitioners, Phahlani Mkhombo and Daniel Terblanche, met with the Air Mauritius representatives on 17 February. A source close to the discussions said Air Mauritius was still keen to invest in SA Express but later decided to put discussions on hold as the spread of Covid-19 worsened.

Details regarding the amount Air Mauritius would inject in SA Express or its potential stake in the airline are unknown. But Air Mauritius couldn’t wholly own SA Express as aviation laws in SA put a 25% ownership cap by foreign entities.

Air Mauritius didn’t respond to Business Maverick’s request for comment on whether it is still planning to invest in SA Express, which was initially sent on Friday 17 April. Air Mauritius didn’t respond to another request for comment sent on Wednesday 22 April. SA Express rescue practitioners were also not available to comment.

Since SA Express was placed under business rescue by the High Court in Johannesburg on 6 February following a successful application by the airline’s creditor, Ziegler SA, the rescue practitioners have focused on finding strategic equity partners as a way to turn around the fortunes of the airline.

SA Express, whose flight routes typically serve SA’s smaller cities, is technically insolvent as its current liabilities exceeded its current assets by R374-million during its 2019 financial year. Despite the successive government bailouts amounting to R1.5-billion that SA Express has received over the past two years, it recorded a loss of R591-million in 2019, more than three times the previous year’s R162-million loss.

Other potential strategic equity partners 

Business Maverick was informed that another potential strategic equity partner that was interested in SA Express is Comair, the JSE-listed aviation group that operates low-cost carrier kulula.com and British Airways under licence in Southern Africa. But Covid-19 completely mothballed its potential plan of injecting capital into SA Express.

“Comair isn’t looking into any opportunities with SA Express at the moment,” said a spokesperson for the company, which has a priority of “resuming operations after Covid-19”.

CemAir, a privately-owned airline operating in SA, has had discussions with SA Express rescue practitioners about a potential investment in the airline.

Miles van der Molen, the CEO of CemAir, said the discussions are still “in their infancy and no offer has yet been submitted”. 

“We have requested and received certain information under an NDA [non-disclosure agreement] to help us ascertain if the whole or portion of SA Express would have value to us, as we operate similar equipment and there is an overlap with one area of our business.” 

Three senior SA Express workers said other interested potential investors are Ethiopia’s state-owned airline, Ethiopian Airlines, and Fly Modern Ark, whose CEO is Theunis Crous. According to a City Press article, Fly Modern Ark is prepared to fork out R400-million to recapitalise SA Express. Ethiopian Airlines and Crous were not available to comment. BM