In mid-April it was announced that South African Airways would begin liquidation proceedings, as the airline started laying off all staff. Well, that didn’t last long…
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South African Airways gets bailout
It has today been announced that South African Airways will get a 3.8 billion ZAR (~211 million USD) bailout. This came as a meeting of South Africa’s public enterprises oversight committee decided to provide further funding to state-owned entities for the current fiscal year, which runs through March 2021.
Regional airline SA Express has also received 164 million ZAR (~9 million USD), intended primarily to counter liabilities from aircraft that are leased.
The problem is that there doesn’t actually seem to be a plan to go along with the additional funding. What exactly is this money supposed to be used towards?
No one knows what’s going on with SAA anymore
SAA has been a basket case for a long time — the airline has been losing money since 2011, and the government has provided just enough funding to keep the airline operating, but not enough funding or direction for anything to materially change. Obviously the COVID-19 pandemic has exacerbated the problems at the airline.
The airline entered business rescue as of December 2019, a procedure by which a practitioner takes control of the company, with the goal of maximizing the odds of survival, or at a minimum achieving a better return for creditors than if the company outright liquidates.
In mid-April the government was committed to cutting off SAA, and days later the airline prepared to liquidate and fire all staff… and then nothing happened.
The government’s plan was apparently to form a new national airline in South Africa, which would be separate from SAA, with the goal of making it financially viable.
But now SAA has just received some more funding, and nobody actually knows what’s going to happen anymore.
Bottom line
We’ll see what’s next for South African Airways, if anything. The airline is getting 200+ million USD, but that’s not actually enough to change anything in a material way.
I give up even trying to make sense of this. Heck, who am I kidding, I gave up on making sense of SAA a long time ago…
The US and EU require that an airline reimburse a customer for purchased ticket when the airline cancels his flight. Does the South African government require that airlines domiciled in SA do the same? Thanks.
@ Bill Khaya:
I've been living in Germany for 7 years now, I'm a layman as to Economics so I can simply say what I've seen here in Germany: this country is a social one. If you lose your job, the country takes care of you FOR AS LONG AS NEEDED. That's why normal people don't really chirp in case big, privately-owned companies get salvaged by using taxpayers' money.
But South Africa isn't a social country. That's why people chirp.
The Airline biz is one of the toughest and obviously our government is not in control for over a decade.
It needs to be privatised one way or the other.
The comments here of painting SA the country as a negative unicorn in the airline biz is typical bashing of ignorant people.
All around the world, including Germany, the airlines are being subidised through different means.
In Germany, the state will half...
The Airline biz is one of the toughest and obviously our government is not in control for over a decade.
It needs to be privatised one way or the other.
The comments here of painting SA the country as a negative unicorn in the airline biz is typical bashing of ignorant people.
All around the world, including Germany, the airlines are being subidised through different means.
In Germany, the state will half renationalise its carrier Lufthansa and pour in 10 billion US dollar, yep.
It has also over the years been supported through in transparent subsidies and helped it buy other European airlines and at the same time stopped foreign airlines to buy out regional airlines in Germany instead supported Lufthansa to buy e. g. last year Air Berlin for billions, now the German taxpayer has to bail them out.
Moreover, companies like Volkswagen are also majority state-owned SOE in Germany, and after the Diesel scandal of betrayal, manipulation, tax envision and so on again the German tax payer must pour in billions of Euros.
The list goes on with Airbus, public transport services like Deutsche Bahn on and on.
In other words, the countries of Europe, even Germany are subject to the same ills like here home.
I am sick and tired of unpatriotic people who are unable to provide a balances-critical voice, like this one here, and praising with half or non knowledge countries like Germany or USA without taking a historical, structural and economical context.
If u want this country great, don't stop at critising the failing gov interventions, but put it in context whenever you are comparing.
China, India, Turkey the other economically middeveloped economies are heavily subsidizing their airlines for centuries, not to mention Emirates.
I believe that all are doing something wrong, not just SA (except Emirates maybe who have enough resource and all their citizens are provided for).
With this in mind, I can now legitimately critise our SA government heavily in the spirit of improving the country for all.
A country of the size of SA can simply not allow itself to be subject of foreign control without a national airline champion, to use a phrase popular in the west.
This is geopolitics beyond pure economics which needs to be addressed though.
Pilots, engineers, logistics, eviation, space industry, border control etc are all sub parts of a working South African airline, at best privatised on my humble opinion, but critising or better say bashing without context of the big picture is at best understand from a poor perspective individual and worst a self-hate prevalent in some parts of the country.
Start being reasonable, productive and positive if everyone is negative we would be still in the official Arpatheid era, and I hope even the strongest critics of the current administration, which I call myself too, do not want to go back too, hopefully!
Let's grow up, together and show the government what the ideal country we love, could be like, by putting our energy not into bedeveling it, but holding it accountable like the people in Germany or a Italy or elsewhere in a democratic country do, contextually, differentiated and expressed love,unity of the country and its entire population.
The reality is that there is no agreed working plan to move forward and too many chefs in the kitchen, so to speak.
This bailout, which SA cannot afford, is to appease unions and to be seen to be trying to stop job losses, which in my opinion are inevitable...
Without profit as primary motive for a business plan going forward, the airline (like any other business) is doomed - sadly a socialist...
The reality is that there is no agreed working plan to move forward and too many chefs in the kitchen, so to speak.
This bailout, which SA cannot afford, is to appease unions and to be seen to be trying to stop job losses, which in my opinion are inevitable...
Without profit as primary motive for a business plan going forward, the airline (like any other business) is doomed - sadly a socialist / communist governing (shareholder in this case) ideology which demonises profit as a motive ensures that this airline will continue to flounder along until someone actually puts it to bed, permanently.
A young democracy? after the second world war Germany rebuilt itself in under 25 years to become a power house of Europe.How did they manage it ? Well they did not steal the fiscus to line their own pockets and a select well connected few. The ANC has presided over this fiasco for the last 25 years so the only ones to blame are the uneducated voters .
No matter what everybody says we all know that the government cannot run any business in every department there is a loss specially in Eskom SAA PIC and on and on
Oh for crying out loud. What is R3,8b going to do? At this point, we have bigger problems than SAA
Why don't the government allows the Ethiopian airlines to give them some technical advise how to get out of this mess?
Pigs have a greater chance of flying than SAA. Enough beating a dead horse! Government must accept it that it is incapable of running an airline, except into the ground!
Fake news, see the bottom of the article:
Editor's note: This story has been amended to clarify that the money to Eskom and SAA was part of funding to the enterprises, and that it was not additional funding.
When will our government learn that it is clearly not qualified to run businesses, and stop wasting our precious tax payers money. Every enterprise it controls are financial disasters. Leave them to the professionals, and concentrate on using our taxes to develop our country further. Can you imagine what the government could have done on social uplftment with all the money it has thrown into the likes of SAA, ESKOM, etc
Next year is elections and cANCer, has to be seen "saving jobs" to ensure votes from the childlike impressionable and ANC fixated masses. (Tshirt-and KFC handouts at election campaigns ensures votes right?)
Where is all the money coming from? Hardly anyone works, companies closing their doors and laying off thousands of tax payers. Billions in cigaret and liquor sales tax revenue lost through incredibly short sighted and irrational government decisions whom has agreed to...
Next year is elections and cANCer, has to be seen "saving jobs" to ensure votes from the childlike impressionable and ANC fixated masses. (Tshirt-and KFC handouts at election campaigns ensures votes right?)
Where is all the money coming from? Hardly anyone works, companies closing their doors and laying off thousands of tax payers. Billions in cigaret and liquor sales tax revenue lost through incredibly short sighted and irrational government decisions whom has agreed to fork out more billions through UIF and other government interventions like the increased social grant payments. Is this our pensions been liberally "borrowed" from and applied while our attention is been diverted in trying to survive the economic downturn?
What is the point really our Government does at it pleases as usual and lines their pockets ,this comes as no surprise.
Fly another airline for 6 months and this should do the trick or maybe the
airline should consider switching over to railroad.
Wasting taxpayers’ money is part of the “new normal” these days. Banks deny soft loans to small SMEs, but large, corrupt, loss-ridden corporations see one bailout after the other.
Just like Alitalia, why can't they let it go through chapter 11 and re-emerge with a business plan to determine whether it feasible to continue flying. Or worse still chapter 7 and done deal. Taxpayers are needlessly funding an airline that doesn't even want to be there.
I think we need to acknowledge that it is a young democracy. I mean at least things now work much, much better than when whites ruled it all.
Which has more lives, SAA or Alitalia? They just won’t die.
Any idea when South African will be flying to Zambia again? My friend has an return ticket from US to Lusaka.
They need to use that money to buy A380's from Air France!
Seriously, they need to let Alaska Airlines be a consultant because they know how to operate once a day flights. Then shrink to a regional carrier. When they recover from that then they can fly to London.
Next will be a Go Fund Me page along with auctioning off excess business class cutlery to raise money.
Well, the South African Rand did crash 45% since the start of the year. Therefore. printing an extra 3.8 billion ZAR means nothing.
$211 million, eh? Pay some airport bills, maybe fuel dues, other than that it’ll make a nice golden parachute for the execs whose bank accounts are on the line