SOUTH AFRICA CAN’T AFFORD TO LET ITS NATIONAL AIRLINE FAIL

South Africa’s finance minister Tito Mboweni has repeated his call for South African Airways (SAA) to be shut down. The reality is that the country can’t afford to let its flagship fail.

Mboweni said on November 19 that there is no way that SAA can be fixed and that it would be better to close it down and start a new airline.

But a collapse of SAA would be “a shock to both the economy and the population, as well as the perception of state-owned enterprises (SOEs) in general,” says Indigo Ellis, head of Africa research at Verisk Maplecroft in London.

SAA has not made a profit since 2011 and is without a permanent CEO.

A week-long strike this month led SAA to cancel flights and cost the airline more than 50 million rand a day.

• The airline said on November 22 that it reached agreement with unions to end the industrial action.
• SAA capitulated on a layoff plan and agreed a pay increase of 5.9% retroactive to April 1 – a deal which it says it can’t afford.

Letting the airline fail could empower the unions to take an even harder stance with regards to other proposed SOE restructurings, such as Eskom – the last thing the Ramaphosa administration needs, Ellis says.

• But further bailouts are “hardly an option” in the face of rising deficits and debt servicing costs, she argues.

Mike Schussler, an economist in Johannesburg, does not expect the airline to survive. “SAA as we know it will not be around in a few years time,” he predicts. The company cannot be sold as it has nothing but debt, some landing slots, some spares and a name, he says. “There can be parts that survive . . . but overall they are gone.”

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