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South African Airlines - does it have a future?

In recent times, a number of African airlines have gone out of existence, new carriers started, failed and started again. The latest is South African Airways, despite a long history. Beset by recent strike action, set to end from Saturday 23 November, SAA expect to have a fully-restored flight schedule in place by Sunday. Nevertheless with its finances not in good shape, the airline looks as though it may go the way of other air transport companies based on the continent. Reported by the South Africa Herald, SAA's financial problems are at the centre of conversations in South Africa and continue to make headlines. Finance minister Tito Mboweni on Tuesday said it would be better to close down SAA and start a new airline.

above - Airbus A340 (Arcturus)

“It unlikely that this would be sorted out, so my view is to close SAA down," he said. “Close it down and start a new airline. All together, invite [CEO of Standard Bank] Sim Tshabalala and others to come together and form a new airline."

Mboweni said the reason he thought closing down SAA would be better than continuing efforts to turn it around, is that it was unlikely the airline would find a private-sector partner. This is not the first time Mboweni has suggested that the national carrier be shut down.

SAA's Boeing 747 aircraft departed the airline some time ago in cost-cutting measures (Bob Adams)

In his medium term budget policy speech in October, Mboweni said SAA was unlikely to generate sufficient cash flow to sustain operations in its current configuration. He said an equity partner was needed to save the airline from “financial ruin”.

“It is unlikely ever to generate sufficient cash flow to sustain operations in its current configuration, which then begs the question: how long are we going to be on this flight path? Forever? I think not. Operational and governance interventions are required urgently.”

Strike action

The national carrier's employees have protesting against possible job cuts and are demanding an 8% salary increase, while SAA says it is only able to offer 5.9%, and only from March 2020.

Last Thursday, the strike entered its seventh day. While the company's management announced the return to work of some of its employees on Tuesday, others continued to stay away until a resolution was announced today (November 22)

No money for SAA

Media commentary from South Africa suggested that minister of public enterprises Pravin Gordhan said while two unions at SAA were demanding salary increases, the government would not give SAA another bailout. During a briefing in parliament on Wednesday, Gordhan warned that the airline might not be able to pay salaries at the end of the month. According to an eNCA report, Gordhan also said the government could not afford the unions’ wage demand as it had no additional funding.

“We may not have enough cash to pay salaries at the end of the month. We are still investigating how we can do that. This is a real-time discussion we are having with National Treasury and the department of public enterprises. We need help imminently.”

Long History

South African Airways was founded in 1934 after the acquisition of Union Airways by the South African government. The airline was initially overseen and controlled by South African Railways and Harbours Administration. Anti-apartheid sanctions deprived the airline of stopover airports during apartheid, forcing it to bypass the continent with long-range aircraft. It was also known by its Afrikaans name, Suid-Afrikaanse Lugdiens (South African Air Service). In 1997 SAA changed its image and aircraft livery and introduced online ticketing services. In 2006, SAA was split from Transnet, its parent company, to operate as an independent airline. It remains one of the largest of South Africa's state owned enterprises. SAA owns Mango, a low-cost domestic airline, and has established links with Airlink and South African Express. It is a member of the Star Alliance.

One of the more memorable aircraft was one of the airline's Boeing 747-300s painted in rainbow colours to transport the South African Olympic team to Sydney. The aircraft was named 'Ndizani'

(Tsung Tsen Tsan)

SAA is reducing its fleet and is expected to cut some 23% of its flights. Standard Chartered Bank was the first bank in June 2017 to call in its loan and the South African government provided R2.2 billion to settle the debt. Citibank also refused to extend facilities and the South African treasury subsequently asked the Public Investment Corporation, which controls government pension funds, for R100 billion to help bail out state owned enterprises, including SAA.

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