I know I am not alone in pondering the future of South African Airways in the light of the extensive negative coverage it has received over the past fortnight. The corporation, clearly by its own admission, can’t cover its operating costs. Given what it owes, it is in fact bankrupt. This is reflected in the front-page announcements of the kind “Citibank pulls plug on bankrupt SAA” and “SAA officials must account for the mess”.
Last week, reflecting increasing nervousness among banks at a possible implosion of this state-owned enterprise, Citibank was the second bank to refuse to extend its loan to what it sees as a sinking company, in this case a loan of R1.8 billion. In June Standard Chartered Bank refused to roll over its loan of R2 billion. This required the Treasury to step in with an urgent bailout to settle the debt because the unprofitable airline had run out of cash and was not generating enough income to cover its operating costs.
The Democratic Alliance’s deputy finance spokesman Alf Lees, who has played a major role in tracking SAA’s increasingly worsening situation and staggering dependance on taxpayers (in other words you and me), has called for a full-fledged parliamentary debate on SAA. In the meantime he has indicated that this state enterprise incurred a loss of R1.5 billion in 2015/16 which spiked to R4.7 billion in 2016/17! And at the current rate, it seems almost certain that the airline will record an even higher hiatus in 2017/18 than in the previous financial year.
Dr Denis Worrall
What can be done? Over the weekend the Minister of Finance, Malusi Gigaba announced the appointment of Vuyani Jarana as the new CEO of SAA. In making the announcement, he said: “Given that Mr Jarana has turned around a loss-making subsidiary of the Vodacom group, into a profitable and growth business, we believe he will be key in turning around SAA.” No doubt Mr Jarana is a clever chap, and we wish him luck, but nowhere in anything written about him is there any indication that he knows anything about aviation companies.
People I know who have had some experience with airline companies tell me that there are essentially four reasons for SAA’s pitiful performance.
First, total mismanagement from all points of view.
Second, foolish decisions in respect to routes. The decision to give up the direct daily flight between Cape Town and Heathrow was idiotic.
Third, a swollen and overpaid staff (with the exception of the pilots — you hear South African dialects from cockpits of airlines all over the world). Regarding the staffing, some years ago a survey of the profitability of airlines was done in part by measuring the number of employees in the airline in relation to the size of the fleet. The three worst performing airlines were:
* Qantas 81 employees
* British Airways 122 employees
* SAA 945 employees
What is there to do? Write off the debts, which in any event is going to happen at the cost of us taxpayers, and find a private buyer — in other words privatise as BA and Lufthansa did, and as Air India is doing right now. Regrettably, while this is the route to go, it is not going to happen. The SAA is a roost for ANC acolytes. In addition ministers and members of parliament won’t want to give up their free tickets.