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.