SAX, SAA, Mango merger ‘makes sense’, says economist

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An SAA airplane. Image: Supplied

The merger of South African Express (SAX), SA Airways and its subsidiary, Mango, as suggested by parliament, makes economic and operational sense, a leading economist says.

Sam Rolland, an independent economist and econometrician, said the proposed merger makes economic sense if it allowed for shared responsibilities that would justify the workforce that would come with the three companies.

“The merger should also not impact negatively on the success of Mango. Experience has shown that legacy carriers have typically not had great success in low-cost carriers. That Mango has been a success should not be compromised.

“There is hope that the merger will go a significant way towards ensuring the airlines remain competitive. Unfortunately, years of mismanagement and attempting to follow a developmental mandate along with running a successful airline has left both SAA and SAX overstaffed, and running inefficient planes.

“Bearing in mind, SAA have also been competing in the global market with outdated planes,” he added.

This week the portfolio committee on public enterprises was briefed about the progress on the proposed merger of the state-owned airlines by the SAX board and executives and representative of the department of public enterprises.

The department said the document which supported the consolidation was now before the economic cluster and would soon go to the Cabinet.

SAX acting interim CEO Siza Mzimela told the committee they fully supported the integration of the airlines, but how the merger would be put together was critical.

Mzimela indicated there were warning signs, the recent grounding of SAX was a result of people not doing what they were supposed to do.

The committee was concerned that SAX moved from being an exemplary airline to losing its reputation, and asked the leadership how they planned to address the damage to its image.

Mzimela promised that SAX would work on its brand and address the perception around safety.

SAX was also a subject of the state capture investigation and fraud probes, after it was entangled in corruption while SAA survived on government bailouts.

The committee welcomed the turnaround strategy and said it hoped it would yield the intended objectives.

As most senior positions, including CEO, were on acting basis, the committee suggested the SAX board should prioritise filling vacancies.

Rolland said the merger should impact positively on the operational requirements and safety of the airlines.

“Both SAA and SAX need to invest significantly in fleet replacement. As a more streamlined and efficient entity with shared cost structures, it should allow SAA and SAX to access financing at a better rate.”

He, however, suggested that a solid long-term strategy was required to determine the appropriate type of airline the company would run.

Eric Naki / The Citizen