South African Airways considers sale of Heathrow slots amid financial challenges

South African Airways (SAA) is considering the sale of its coveted landing rights at major international airports, including London Heathrow, as it seeks to secure a financial lifeline amid prolonged financial troubles, reports News24. This possibility was raised in a recent briefing to Parliament’s Standing Committee on Public Accounts (Scopa) on October 22, where the airline outlined steps it is taking to stabilise its financial position.

The potential sale of these valuable Heathrow slots comes after the collapse of a planned equity deal with the Takatso Consortium, which was initially set to provide SAA with a much-needed R3 billion (€157 million) capital boost. This partnership, announced in 2021, aimed to end years of government-funded bailouts by granting the consortium a controlling stake in SAA. However, after nearly three years of negotiations, the deal ultimately fell through earlier this year, leaving SAA without the expected financial injection.

Transport Minister Barbara Creecy shared that while SAA has managed to clear its debt, it still requires new investment to support its operational needs and growth. She highlighted the ongoing search for an equity partner, potentially from development finance institutions or international airline investors. “At the moment, we do not have any interest on the table,” Creecy told MPs, underscoring the uphill task SAA faces in securing the required capital.

SAA Chairperson Derek Hanekom detailed the operational adjustments the airline has had to make since the Takatso deal fell apart. “After the failed Takatso deal, we had to make considerable adjustments because the R3 billion injection was no longer coming in,” said Hanekom, as reported by News24. Despite the setback, he emphasised that SAA is currently seeking a small loan facility to boost its cash reserves. Hanekom noted that SAA’s improved financial stability has led banks to take a renewed interest in its business plan, with SAA’s unencumbered assets, valued at R5 billion (€262 million), being considered as collateral for the loan.

Historically, Heathrow landing slots have commanded high prices. In 2016, for instance, Oman Air purchased Heathrow slots for US$75 million, illustrating their considerable market value. However, recent regulatory changes by the UK’s Civil Aviation Authority, which aim to reduce landing charges, may affect the value of these slots, potentially diminishing their financial yield.

The idea of selling SAA’s Heathrow slots is not new. In 2012, SAA sold one of its prime Heathrow slots to generate funds. Currently, SAA leases some of its Heathrow slots to airlines like Qatar Airways. Aviation economist Joachim Vermooten commented to Travel News that selling the slots could be prudent if SAA has no immediate plans to resume flights to Heathrow. “SAA would ultimately have to decide whether it plans to operate to Heathrow again. Otherwise, it could look at other airports surrounding London, possibly Gatwick,” Vermooten suggested.

In her briefing to Scopa, Creecy also updated on SAA’s efforts to complete its financial reports for the fiscal years 2022/23 and 2023/24. She confirmed that the 2022/23 report is finalised and that the 2023/24 report is on track for submission by February. These developments come as SAA plans to expand its fleet and revive its international routes, with a target of increasing its aircraft from 16 to 21 by next year.

Despite its financial and operational challenges, SAA leadership remains optimistic about the airline’s trajectory. “We believe in the potential of the airline. There is no doubt we are on a growth path,” said Hanekom.