Not even national pride can save SAA
26 November 2019
Many politicians fear their nations will be irrelevant if they abandon their money-losing, flag-flying airlines.
In most places, the market would fill the gap — provided the government got out of the way.
But national pride is powerful, costly and often stupid.
What is South African Airways’ (SAA) stated vision?
I quote, it’s “to deliver a commercially sustainable world-class air passenger and aviation service in South Africa, the African continent and to our tourism and trading partners.”
Well that’s a fail then.
It is a commercial disaster bar none, and a massive drain on the fiscus.
South African Airways only continues to fly with massive government assistance – to the tune of some R57 billion cumulatively since 1994.
The airline has tried to restructure 10 times in the past two decades.
According to Sean Gossel, who teaches at the Graduate School of Business at the University of Cape Town. “Over 50 African countries continue to dabble in the airline industry despite the continent’s poor track record, mainly because a national carrier is believed to be a source of patriotic pride and economic status – both of which are very seldom borne out in reality.”
South Africa, along with Zimbabwe, India, Pakistan and Romania still have tight control over their airlines - all of which are in debt – to the tune of many billions.
Many experts hold that a country should offer subsidies to a foreign airline to run routes the government wants served. South Africa might not get the boast of having its flag carrier abroad, but taxpayers will win.
Anyway, all of this is moot.
SAA is dying, it’s in the departure lounge – a lesson that governments should never be involved in airlines.
And if they do, a hands-off approach is needed, where government — which may or may not own shares — acts in the background to prop it up but doesn’t meddle much in day-to-day operations.
But the post-1994 ANC government has provided a textbook case for meddling, dictating labour hiring by way of cadre deployment at all levels, and the facilitation of graft. For example, at SAA Technical, the maintenance wing, this meant an inflation of between 30% to 40% due to middlemen in the overall expenditure of R3.4 billion. For doing nothing – dololo. Nice work if you can get it – assuming you have zero morality, that is. It might have also helped if SAA were located in a place where operating an airline hub makes sense
– in case you need a lesson in geography, we are situated on the southern tip of this continent, along with Australia, New Zealand, Chile and Argentina, we are the closest land mass to Antarctica.
One continental success story is Ethiopian Air, a government-owned but business-driven enterprise that by most accounts is the only true global airline in Africa, with a network stretching from Beijing to Los Angeles to Sao Paulo. It has been so successful that other African countries are asking it to manage their airlines.
So, sell this albatross to them, or to Richard Branson or anyone else who may be interested. We’ll probably have to pay them to take it off our hands. In any event SAA is a limited liability company and the cost of closure would be R19.7 billion.
The choices are clear – close it down, place it in business rescue, or pay someone to take it over – you might even negotiate a small carry to feed your socialist ego.
But to continue to bail it out – having shouldered bailouts to the tune of mega billions to date is sheer unadulterated madness.
And as for Dudu Myeni – lock her up and throw the key away.
Issued by Ghaleb Cachalia, DA Spokesperson on Public Enterprises, 26 November 2019
