When Etihad was on a binge investing in troubled foreign carriers like perennial basket case Alitalia and air berlin, there was one they wouldn’t touch. Despite much speculation about a cash infusion from the Abu Dhabi-based carrier, South African Airways’ only lifeline has come from the government.
South African received a bailout a year ago to help with a new CEO’s plan to stabilize the airline by convincing banks they would continue to exist.
Despite government cash infusions the airline’s debts now exceed their assets. They are looking to sell assets to raise cash (which won’t change their balance sheet) and looking to the government ‘for more bailouts’ despite already having 19.1 billion Rand in government guarantees (~ US$1.3 billion).
South African Airways (SAA) is technically bankrupt after its debt increased to R15 billion – more than its assets.
This is according to the City Press, which reported the “airline’s finances are in tatters and the Auditor-General has raised serious concerns about its viability”.
According to the article, the airline is considering selling off some of its assets, including its catering arm, Air Chefs, and SAA Cargo.
A top SAA official told the newspaper that the airline will look at the government for more bailouts, because the banks are refusing to lend it money.
A report to the company’s board says the airline faces “rampant corruption, low pilot productivity, a significantly weak balance sheet, liquidity problems, loss of confidence from suppliers, a lack of critical skills and fragmented IT systems.”
The airline keeps promising reforms, but those have been politically impossible, ““here are too many people benefiting from the way it is, both in terms of those who are looting the business and those who are getting paid salaries… to want to change the status quo.”
Copyright: tupungato / 123RF Stock Photo
In the meantime since they airline is ‘technically bankrupt’ they will simply not present financial statements despite a legal requirement for them to do so.
The airline still claims they can get to profitability by 2021 if only they receive another ~ US$1.5 billion.
Major US airlines, and their proxy ‘Patnership for Fair and Open Skies’ (which want to abrogate Open Skies, natch) have been strangely silent on these subsidies for an airline which flies to the U.S.
I have an award flight booked with them in Dec (Jan return). Yes, the coveted IAD-DSS in business class which I booked for 50k Virgin miles. What might happen given the situation? What are the possible scenarios, three months out from my flight?
C’mon, Gary. You know why the US airlines are silent on SAA. It’s your typical, small state-run basket case airline. If they were getting $50 billion from the South Africa gov’t and using it to grab a big chunk of the global connecting air transport market, the US airlines would “care.” This is just common sense, which you seem to check when it comes to the “issues” with Mideast airlines.
In the meantime, the situation with SAA is sad, but there is probably no solution. We (the West) insisted on “democratic reforms” in South Africa. What were the odds that things would go well in a country where power was going to be passed from a small percentage of the population that had all the wealth and know-how to a poor, uneducated population? The odds were very low. I would say South Africa has done much better than would have been reasonable to expect, largely due to Nelson Mandela. But there are still many huge problems in South Africa, including rampant corruption in government. How is a state run airline going to be operated efficiently in that environment? It never will be. So either there will be more big subsidies, or SAA will eventually go out of business.
@Jeff — the odds are at least 90% that you’ll be fine. The problems with SAA have been going on forever. Unless you start reading that the government is seriously considering “pulling the plug,” these latest problems won’t affect you at all in 3 months. I fly SAA all the time are their service is more than adequate. In other words, you’d never know they were broke. Kind of like my last flights on Air Berlin!
They won’t let it die. It’s one of those cases where the airline is more than an airline. It’s a symbol of the country and it’s also a company that can provide lots of jobs to lots of prominent people. It’s a shame SAA is in that situation though. Flew with them a few times and the service was very good.
The major US airlines are not complaining about these subsidies because the losses that are being subsidized are not going into unfair competitive advantage, they are being stolen/wasted in corruption. I know you were probably taking a dig at the US carriers, but you actually made their point why charging the same price as U.S. carriers but offering caviar, showers and massages with subsidy money is so objectionable to them.
Any wonder it’s gone broke. Let it die. Has anyone flown with it recently? Aircraft are old, dirty. Flight attendants are disgusting, rude people and oh so lazy. My god they are lazy bastards. Try and call the call centre. Laughable. This is an airline stuck in the third world.
SAA, the rest of the world is well and truly over South Africa and its problems. And now they are resuming white farmers land and killing white farmers. Reverse apartheid. Going down the same path as Rhodesia dod when that mongrel Mugabe took over.
So SAA, not for me. Let the airline die a natural death and let’s see who misses it. That would be no one.
Obviously, the big 3 US airlines couldn’t care less about subsidies as long as they get their own subsidies and the foreign airline is no threat. It’s crazy hypocrisy, but that’s what happens with over consolidation, and the arrogance that follows.
@Robbo — You are very much overstating South African Airways’ woes, as well as those of South Africa. Yes, SAA is not a great airline but, honestly, it’s not really worse than flying a US airline when it comes to service. Personally, I have always gotten decent service from their call centers. Their airport staff is reasonably friendly. Their flight attendants, on average, are as friendly and helpful as US airline flight attendants. This is no 5-star airline. But it’s more than acceptable to fly.
As far as the other “problems” in South Africa, we’ll have to see. It’s a complicated country. It might become Zimbabwe. So far, that’s not happening. And, fwiw, SAA is probably the best run part of the South African government (well, their National Parks are probably run better). Which isn’t saying much, but is saying something!
Jeff, I purchased SAA business class to Johannesburg with return from JNB to Zurich then United to IAD. All this was purchased through United. This is in June. After reading your post, I want to know what happens if SAA stops flying, will United book us on something else? Will I lose my money? This is for three of us so it adds up. Should I try to get them to switch my booking, if even possible? June is a long way away. Help! What should I do?
Jane, from what the other comments say it seems there is no need to worry. Those with more knowledge here indicate it will continue to operate. I trust these folks and am no longer concerned.