Uh Oh: Government Cuts Off South African Airways

Filed Under: South African Airways

At this point it would appear that South African Airways has no path forward except liquidation… unless South Africa’s government backtracks (which they usually end up doing).

SAA is already in business rescue

South African Airways has been losing money for years, and like so many national airlines, has been kept in limbo. For years the government gave the airline enough money to scrape by, but not enough resources to actually turn things around.

Then in December 2019 SAA entered business rescue. With this, the company was taken over by an administrator who was tasked with turning the business around, and if that’s not possible, minimizing the loss to stakeholders.

For a while the argument was made that the current pandemic could help SAA:

  • A decrease in international flying by all airlines would decrease the cost to lease jets, making it easier for SAA to renegotiate lease terms on planes
  • Oil prices are crashing, which lowers fuel costs, one of the biggest operating costs for the airline

That seems optimistic, and unfortunately increasingly things aren’t looking good for the airline.

The government is cutting off SAA

At the moment we’re seeing governments around the world extend funding to airlines, given the extraordinary circumstances. It seems South Africa is taking the opposite approach — they provided aid in good times, but aren’t prepared to offer any more assistance.

Bloomberg notes that on April 14 the administrators at SAA were told by the government to not expect further funding beyond what has already been promised. Rather the airline is being told to source cash from other available resources.

South Africa’s Finance Minister has long been in favor of cutting off the airline, and notes that with COVID-19 having such a negative impact on the economy overall, there’s simply no way to keep funding loss-making SAA.

At this point it seems like SAA is out of options, with liquidation being the only real possibility:

  • The government isn’t providing any more funding
  • While SAA could look for private investors, they couldn’t find any during good times, let alone at this time

Bottom line

The government of South Africa is now cutting off SAA, and presumably that means the company’s days are numbered. Maybe the government will backtrack, as it wouldn’t be the first time, as I can’t imagine the airline will find any private investors at this point.

Comments
  1. This is sad news, but SAA is (soon to be was?) a pretty bad airline, from the mismanagement to the staff and service standards.

    Union of Metalworkers of South Africa pushed very hard for recent staff pay increases (I believe the National Transport Movement sat out the last round of negotiations), all for naught.

    Hopefully, should SAA liquidate, another national carrier will rise from SAA’s ashes, though I would think it would be sometime in the future, because I can’t imagine anyone trying to start a new airline right now…

  2. Just an off the top of my head kind of thought. I’d wonder if South African might be able to do something like SAS (SK)- by that I mean forming one carrier who in turn becomes the national carriers of several countries.

    I mean, I think carriers like Kenya Airways can make a go of it solo, but I might think the forming one regional carrier – maybe Kenya, Tanzania, Rwanda and South Africa – may be more viable given the expected new reality and the local, regional markets they serve as well as the international competition.

    I get it that national carriers are, in many cases, more than just an airline, they are a defacto representation of that nation- but I think perhaps a regional carrier might be a way to more viable long term.

  3. i don’t support any idea of the government backtracking on their cutoff. The reason SAA, Alitalia, and Thai etc have degenerated into the shit shows they are today precisely cuz the crew and/or unions know no matter how unreasonable of a bully and their demands are, they would always win. The collapse of one might finally scare the crew of the other 2 enough to actually negotiate in good faith.

  4. Bankruptcy is a commonly used tool to wipe out debt. It does not necessarily mean this airline will stop operating but given the current environment it may be cheaper to wipe out the debt and just reorganize.

  5. It would be one thing is SAA had a valuable brand to somehow preserve, but that isn’t the case. I hate to see any airline go under, but in this case it might be the only option. The South African government and economy is a mess.

  6. Not quite accurate. The Government will not provide ADDITIONAL funding, but will provide the funding already committed. The Business Rescue practitioners had requested additional funds recently due to the COVID situation. This basically tells the BR team to go back to the drawing board and try to come up with a plan within the resources already committed.

  7. Open up South Africa to 20 years of cabotage. Then invite Ryanair, Southwest, Ethiopian, Kenya, Azul, or other airlines to come in.

  8. if they form something like SAS it would most probably be South Africa, Namibia, Botswana etc. – that’s my guess on that. SAA could be the name 🙂 Southern Africa Airlines or ASA Airlines of Southern Africa … would made abit of sense. If Ethopian takes over JNB … and all the business travel … I think its gonna be hard for any new national carrier to claim back traffic, to get a portion of the cake …

  9. Let’s hope this is a preview of October in America. Cut em’ off and let em’ deal with it.

  10. Unfortunate news, if true.

    For almost a decade we would fly from YVR to CPT for winter months (3). Whenever we could find flights we would use SAA from Sao Paulo, JFK or HKG as available with links on AC or Eva.

    The SAA flights were always the highlights with friendly crew, great food and great SA wines. The A340 was always a bit sad with dry air but otherwise the long flights were pretty comfortable and the zero YQ didn’t hurt either. Flying as a couple the business configuration was actually better than the new all-aisle-access styles.

    Also used to enjoy Condor business angle-flats for the short(er) trips to Europe. Pretty well always leave a lie flat with a bit of positive pitch which allows heads up comfort.

    Sad to see both of these airlines in deep doo doo.

  11. Good news, the Billions wasted could have been put to better use, SAA has always been more expensive when comparing prices on Travelstart, we have Fly Saf air, BA, and Kulula for domestic travel with better prices, Kenya air and Rwanda great airlines. Kulula should take over the flights Airlink and Express fly to give them competitive prices, eg. Hoedspruit, Kasane, Kimberly, those routes are also overpriced.

  12. I guess the money for 4 tickets end of July this year is down the drain. What do you think? I don’t think other airlines will take over these already bought tickets…

  13. If SAA go down what happens to us poor pensioners who bought tickets with them but could not fly because of the Corona virus ? We bought through Webjet and they told us we have a credit with SAA now. If they have no money what happens to ticket holders please!

  14. I have flown from north America through Europe to Africa and back.I have found SAA exceptional and on time, friendly and good service.Can something be done as I feel they are a pride to us that come from that region

  15. We have 6 tickets on SAA to Johannesburg for May for A Safari and now have rebooked it for Aug but what about SAA air, will they be in business and if not will we ever get a refund?

  16. Sad news about SAA. SAA has been good to us. Direct flights from Washington, DC to Johannesburg, or New York to Joburg, have been absolutely wonderful! They saved us from going through Europe and wasting days traveling. I hope a good business plan emerges to save SAA.

  17. The below is a very good (from my view as an outsider looking in) analysis of SAA’s overall problems and why there is unlikely to be a solution aside from liquidation. Still regretting having to cancel our safari in June (no reaL choice though) that featured nonstop travel in one of the few next to each other pairs of seats in business JFK to JNB. Hopefully those with money invested in tickets can apply to their credit cards for refunds.

    https://mg.co.za/article/2020-04-16-without-a-clear-plan-saa-stood-no-chance/

  18. As to the Zuma years of rule by incompetent, unqualified people and corruption intreduced by Zuma has a final impact on SAA, a proud sixty five year old airline that contributed to the economy generating revenue has now became junk status. However the way things are going it appears that our future will be that of Zambabwe with a sad ending with no prospects of a future.

  19. Personally I don’t care for SAA. I fly with them all the time, mostly on international routes, and their service is good and planes largely on time. However, in view of gross mismanagement and corruption that has brought it to its knees, I see no point in keeping them around. Rather put that bailout money back into the pension funds, which have already been stolen practically empty, by Jacob Zuma and his ANC pals.

    I am not “symbol” kind of person, and to have a national airline means nothing to me. So let SAA disappear, and lets have other competitive airlines take over the routes formerly monopolized by SAA. There’s nothing better than competition to force down prices!

    I mean , in the US you don’t have a “national” airline! You have Delta, United, Soutwest & American among the largest ones, however none of those are state controlled. They’re all private airlines.

    That’s the way to go! Get rid of nationalization!

  20. @gary

    Good point about the disintegrating social structure of South Africa as a result of the Zuma corruption years. The last time at the Cape we were surprised to learn of the same underground violence towards the white farmers in the areas north of Paarl. Bands of thugs were invading farms just like in Zimbabwe, killing and raping, without any fear of the local police.

    Only saw brief mention on some BBC broadcasts. When talking to the local inhabitants they were very concerned and many refused to stay on their farms over the weekend if they did not have suitable protection.

  21. If any of you have future reservations on SAA, contact the airline and get it in writing that they won’t refund your money. Then call the issuing bank of your credit card and dispute the transaction.
    I don’t know if the airline is liable, but if you do this before they liquidate, what harm can it do? Don’t ever be victimised when you’ve paid for something with a credit card and the merchant hasn’t provided the service.
    Also, a class action lawsuit is an idea. Don’t allow yourself to be defeated because SAA CHOSE to give you crap service!

  22. I have 4 tickets on SAA in June 2020 from JNB to VFA for safari like others on this comment list. I’ll see if I can get the non-refund in writing. Currently, they only are only offering vouchers for future travel. OUCH.

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