The experience gleaned during the sell-off of state-owned South African carrier Sun Air should help ease the partial privatisation of South African Airways. But there are strong doubts that the flag carrier will be in any fit shape to meet the government's stated end-of-year deadline.

Captain Johan Borstlap, managing director of Sun Air, says the sale of the national carrier will in all likelihood follow the principles of the position paper drawn up between Sun Air, the unions and the government, based on the so-called National Framework Agreement on the privatisation of state assets.

'The successful sale of Sun Air can be considered a learning curve for the ministries of Transport and Public Enterprises when they get around to calling for bids for SAA. All the unexpected problems we encountered will be allowed for in the case of SAA which should go a long way to smoothing the process,' explains Borstlap. But he stresses that as only 30 per cent of SAA would initially be sold off, there will be differences to the Sun Air format.'What we have learned from negotiations in the Sun Air sale is that the principles laid down between government and labour have taken shape and are working. We know what the future structure of Sun Air will be and we have agreement on that structure.'

However, there are doubts in some quarters that SAA is ready for any form of privatisation. It expects to record a R350 million (US$78.3 million) loss for the year ending March 1997. And sources in the Department of Transport suggest even greater losses are expected next year, which they say will only spur the government on to expedite the sale. But how the prospect of the flag carrier slipping further into the red will attract potential investors remains open to question.

SAA's chief executive Mike Myburgh, who is known to favour full privatisation of the carrier, denies that SAA's losses will deepen next year. On the contrary, he says the airline will show a small profit following the containment of costs and a reduction in expenses.

But at the heart of the Department of Transport's fears is a damning confidential report by SBC Warburg. The investment bank, which was appointed by parent company Transnet to evaluate SAA, has identified deep seated managerial problems that are hampering the turnaround.

Meanwhile, the four short-listed consortia for the Sun Air sale, led by Virgin Atlantic, Malaysia Airlines, Air France and Comair are currently digesting the carrier's five-year business plan. Borstlap says Sun Air, valued at between R60 million and R90 million (US$13.4-20.1 million), is well placed to improve on the R2.6 million profit for 1996 once the fleet replacement is complete. This will see three B727s withdrawn from service and replaced by five leased MD-80s, which will operate alongside five DC-9s. Future growth plans envisage the expansion of the domestic network as well as the start of regional operations.


Source: Airline Business