Privatisation has become a bit of a buzz word among Africa's airlines recently and, while some plans should be treated with healthy scepticism, the search for foreign and local investors for South African domestic operator Sun-Air should prove less difficult.

The first stage of the full privatisation of Sun Air was due for completion in mid-April when advisor Natwest Markets and South African affiliate BOE Natwest were expecting initial expressions of interest. Adrian Williams, director corporate finance at Natwest, says the most likely outcome would see a consortium, made up of a foreign carrier and local investors, buy the bulk of the airline with the rest of the equity going to employees and a government asset management fund. The government is expected to draw up a shortlist and call for final offers in June.

Williams adds that moves are underway to raise the foreign ownership limit to 49 per cent from 25 per cent and says he has spoken to a number of carriers in northern Europe, the US and Asia-Pacific. Sun Air currently codeshares with KLM and Virgin Atlantic in the South African domestic market and both must be frontrunners.

Virgin chairman Richard Branson has already said he would 'like to buy Sun Air' and use it as a basis for a pan-African airline. KLM, on the other hand, has already taken a 26 per cent stake in Kenya Airways, the only successful example of privatisation in Africa as yet. The Dutch carrier could be given more impetus if plans by South African Airways affiliate Alliance Airways to absorb and privatise the Ugandan and Tanzanian national carriers succeed.

Williams terms Sun Air 'a unique opportunity' as an established player in a market where new competitors are likely to be thin on the ground. Sun Air has turned itself around without government subsidy and is profitable at the operating level. Turnover was R140 million ($32 million), up 250 per cent, in the year to 31 March 1996, but Williams refuses to disclose the airline's net income.

He says Sun Air carried some 720,000 passengers in 1996/7, of which 70 per cent was business traffic, and has a 13 per cent overall share of the domestic market. The carrier operates a fleet of five DC-9s and 3 B727-200s, acquired on a mixture of finance and operating leases, and focuses on the so-called 'Golden Triangle' linking Cape Town, Johannesburg and Durban.


Source: Airline Business