Senegal Says South African Airways Among Airline Suitors

South African Airways is in talks to buy a stake in Senegal Airlines as the continent’s biggest carrier seeks to counter expansion strategies at competitors Ethiopian Airlines Enterprise and Kenya Airways Ltd.

Senegal has received bids for the purchase of at least 30 percent of its national carrier from companies including South African Airways, Finance Minister Amadou Ba said in an interview. Johannesburg-based SAA said it’s mulling a transaction after being courted by the Senegalese.

Africa’s three leading airlines have begun a contest to tap traffic beyond their home markets as the International Air Transport Association forecasts that the region’s carriers will earn money this year for the first time since 2010. Ethiopian Air, the African No. 2, added a hub in Togo, West Africa, in 2008 and was due to open another in Malawi in the south today.

“We’ve received a few offers,” Ba said yesterday in Abidjan, Ivory Coast, adding that Air France-KLM Group (AF), Europe’s biggest carrier and a 27 percent shareholder in Kenya Airways, the African No. 3, is “not excluded” from the talks.

“We have been approached by the Senegalese authorities and they presented an offer to us for our consideration,” SAA spokesman Tlali Tlali said in an e-mailed response to messages. “The offer is still under consideration at this stage.”

Senegal Airlines, in which the state has a 51 percent stake, was set up in 2009 after the collapse of Air Senegal International and operated its first flight in 2011. The government is seeking partners after boosting its holding last year to stop the carrier going bankrupt, Ba said.

FastJet, Mango

The Dakar-based airline serves 15 cities in West Africa, including most capital cities in the region, while offering services to Belgium via a code-share with Brussels Airlines, according to its website. The fleet comprises three Airbus Group NV (AIR) A320 single-aisle jets and an ATR 72 turboprop.

South African Airways had said in 2012 that Ghana was the preferred location for a West African joint venture, adding last year that an East African hub was an alternative option.

Sub-Saharan airlines are also vying for discount sales. Kenya Airways owns 49 percent of Precision Air, the largest Tanzanian carrier, and is due to introduce new low-cost unit JamboJet this quarter after startup FastJet Plc began flying in Tanzania in 2012. SAAA set up discount unit Mango in 2006 and has said the brand could be used in other parts of Africa.

Long-Haul Rethink

Ethiopian Airlines Chief Executive Officer Tewolde Gebre Mariam said in June that after Togo and Malawi the Addis Ababa-based carrier planned to add a hub in the Democratic Republic of Congo to secure central African transfer traffic as part of a plan “to cover the continent” and fend off competition from Mideast operators such as Emirates of Dubai.

South African Airways suffered a loss of 991 million rand ($88 million) in the year through March and is negotiating with the state about a capital injection, it said yesterday.

Public Enterprises Minister Malusi Gigaba told an earnings press conference that a request for proposals for wide-body aircraft for delivery from 2017 had been put on hold, delaying a fleet renwal plan aimed at replacing aging Airbus A340 planes with more fuel efficient A350s and Boeing Co. (BA) 787 Dreamliners.

Gigaba said the 60 billion-rand order, which SAA said in July would be for at least 23 jets, “should not just provide us with metal” and that there must be “benefits for our country” in terms of industrialization and localization.

CEO Monwabisi Kalawe, who stated last month that SAA needs billions of rand from the government and won’t break even for four to five years, said he could provide no firm date for the awarding of the fleet contract. Ethiopian Air was one of the first 787 operators and Kenya Airways has the model on order.

South African Airways and Ethiopian Airlines are both Star Allince recruits, though Kalawe said in June he would review the benefits of membership while exploring the possibility of closer ties to SAA’s African rivals. Nairobi-based Kenya Airways is a member of the Air France-KLM-led SkyTeam group.

To contact the reporters on this story: Olivier Monnier in Abidjan at omonnier@bloomberg.net; Kamlesh Bhuckory in Johannesburg at kbhuckory@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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