Abstract
Background: South Africa adopted an economic policy that included both deregulation and
privatisation in line with the 1980s’ global trends. Economic deregulation of the domestic air
transport market was implemented in 1991 and partial privatisation of South African Airways
(SAA) 8 years later, in 1999. This was reversed in 2002. SAA’s poor financial performance since
2012, its insolvency and future funding needs resulted in mixed messages on the future
ownership of SAA. Since 2004 the policy of full ownership of state-owned enterprises (SOEs)
ruled out SAA’s privatisation. SAA’s escalating losses prompted the Minister of Finance and
National Treasury to favour the introduction of a strategic equity partner (SEP) to invest in a
minority shareholding in SAA.
Objectives: This article examined options for the restructuring of state ownership of stateowned
airlines in South Africa.
Method: Contemporary privatisation trends and the level of state ownership of airlines in
Europe and elsewhere were identified. The preferred methods of airline privatisation and their
economic benefits were determined.
Results: Contrary to the freeze of privatisation in South Africa, increased trends in privatisation
were identified elsewhere. In particular, share issue privatisations (SIPs) on listed securities
exchanges were favoured to SEPs. South African Airways’ financial circumstances demonstrate
the need to eliminate SAA’s losses and to resolve its insolvency.
Conclusion: The South African official definition of privatisation needs to be broadened to
include SIP instead of being limited to the sale of shares in SAA. The SIP method of privatisation
is ideally suited to resolve SAA’s capitalisation and subject SAA to market and regulatory
disciplines.