South African airline industry veteran Gidon Novick has rubbished reports he demanded ZAR1 billion rand (USD57.7 million) to merge Global Aviation Operations' scheduled brand, Lift Airlines (LIFT), with South African Airways (SA, Johannesburg O.R. Tambo) as part of privatisation talks with the South African government, reports News24.

Novick, who is a co-founder of LIFT, last week resigned from the board of the Takatso Consortium, the government's preferred strategic equity partner for a 51% stake in SAA, citing a lack of transparency in the progress of the transaction and doubts over the consortium's ability to raise the required ZAR3 billion (USD173 million) in operating capital for the national carrier.

He was responding to a November 21 front-page report in South Africa's Business Times citing unnamed sources privy to the deal that there had been an initial understanding that LIFT and SAA would merge. However, things reportedly turned sour when Novick and his business partners set an "unreasonably high price on their start-up airline and further demanded management control" of a semi-privatised SAA.

Global Aviation and Novick's consultancy Syranix are minority partners in the Takatso Consortium tasked with bringing airline technical expertise to the table. The majority partner and asset management firm Harith General Partners is to raise the required funds. After almost two years of negotiations with the Department of Public Enterprises (DPE), the transaction is now being scrutinised by South Africa's draft regulators. Harith last week welcomed Novick's resignation saying his role at LIFT had come to present a conflict of interest as LIFT developed, which is why he had been kept in the dark. In particular, LIFT had sought a codeshare relationship with SAA without informing Harith, which didn't go down well.

In response, Novick told News24 discussions of a possible merger early on had involved "a much lower price tag" as LIFT had only been trading for a couple of months at the time. He also told Business Times that initial merger talks had never reached the stage of evaluations. LIFT was not for sale. "It is only getting started and so I think it would be premature to sell it," he told Business Times.

In addition, Novick pointed out there was nothing untoward about codeshare discussions as these were standard business collaborations. The notion of a conflict of interest had become "a red herring," he charged. "We are in discussions with SAA and several other airlines. These are normal industry arrangements. There is no attempt at a clandestine backdoor merger," he said.

Novick confirmed the possibility of a merger was explored initially but presented practical challenges with LIFT being a new brand and SAA re-emerging from business rescue. Still, he believed it could still make sense. "It's the best way to remove any potential conflicts and align interests going forward as well as consolidate an industry that has one dominant player currently and many smaller players. We need a competitive and sustainable industry." He argued that LIFT has a strong brand in the domestic market, while SAA is well placed to re-establish regional routes and some long-haul destinations.

Novick said LIFT had "grown significantly" since the early discussions, noting it was currently operating six aircraft and expected to carry 1.5 million passengers in 2023. "The valuation has increased substantially and continues to increase."

Meanwhile, in a statement, the DPE reiterated that the government was awaiting the completion of the regulatory processes and thereafter would finalise Takatso's acquisition of the 51% shareholding in SAA. "The deal is not at risk." It added: "The DPE is confident that as a strategic equity partner, Takatso will introduce the required technical, financial, and operational expertise into the business."