South African Airways has been losing money for years, and their losses keep getting bigger. The airline has an inefficient fleet, an inefficient route network, and there are also reports of a lot of corruption. The airline has missed several payments to creditors, and in 2017 South Africa’s deputy finance spokesperson said that “essentially they are insolvent and should have filed for liquidation.”
The airline went through seven CEOs in five years, which gives you a sense of the situation they’re in. Last November the airline appointed their first permanent CEO in three years. The guy actually seems to have a strategy for the airline, and wants to shrink SAA into profitability. He thinks he can turn the airline around within three years, which is no small feat when you consider that the airline lost 473 million USD in 2017, not to mention oil prices are rising.
SAA’s strategy was to shrink by cutting money-losing routes, and also to transfer unneeded planes to Mango Airlines, their profitable low cost subsidiary. SAA’s new CEO was so confident the airline will become profitable that in June he bet R100,000 (~8,000USD) of his own money that he can make the airline profitable within three years. Okay, that’s not exactly a huge sum, but I appreciate the idea behind it.
Unfortunately things haven’t improved much for the airline, as SAA is still in massive amounts of debt. Well, there’s some good news for the airline… or something. I’m not sure the government is actually doing anyone a favor here.
South Africa’s finance minister has announced an R5 billion recapitalization/bailout of South African Airways, to settle debt that’s due between now and March 2019. This follows the airline receiving an R3 billion bailout last year.
The finance minister says he’s in favor of a partial or total privatization of the airline, per Times Live:
“(At some point) Swiss Air was not functioning very well and the Swiss decided to close it down and invite those who know how to run an airline to start a new airline called Swiss International. So these things are doable. So in the reconfiguration of SOEs‚ we need to be open minded and be modern enough because the world has changed‚ it has not remained static.”
Bottom line
South African Airways continues to be on life support. I really don’t get what the government is doing. They’re basically just continuing to fund debt as it becomes due, without actually radically turning around the airline. While the current CEO has made promises, I haven’t seen any material shifts in their strategy that will lead the airline into profitability.
On the plus side, if you’re booked on South African Airways over the coming months, at least you know the airline will still be flying… probably.
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