South African Airways (SAA), Air China and Hainan Airlines are in discussion to form a partnership and build a new aviation hub in Africa, with the possibility of Air China and Hainan Airlines taking equity in SAA.
However, an informed source said an immediate equity move was unlikely due to SAA’s poor performance.
SAA announced on January 30 that it would hand over its Beijing direct flights to Air China. The service, launched in 2012 in response to South African President Jacob Zuma’s China policy, took heavy losses of almost 1 billion rand in three years. SAA will pull out all China services from April this year in order to stem losses and cut costs.
SAA has been suffering heavy losses in other service areas too in the past two years. Passenger services were 2.55 billion rand in the red in the 2013-2014 fiscal year, and the carrier is most likely continued hemmoraging capital into its recently closed 2014-2015 fiscal year.
Last year SAA said it was looking for equity partners for its financial recovery plan. The deal with the two major Chinese carriers is likely to include the development of a new West African aviation hub to counter the rapid rise of Ethiopian Airlines and Kenya Airways. The partnership is also expected to help promote exchanges between China and Africa.
Hainan Airlines has been constantly making overseas acquisitions since 2010. It acquired an Australian aircraft leasing company and the world’s second largest semi-submersible marine transportation company based in Norway in 2010. It acquired the Turkish ACT air cargo company in 2011 and made the first Chinese aviation investment in Africa by setting up Ghana’s AWA airlines in 2012.(Translation by David)