Outrageous to think of keeping SAA afloat

The aviation industry globally is on its knees. International travel bans and lockdowns across the world have decimated air travel demand. Aviation experts believe only the strongest airline businesses have any chance of survival. The International Air Transport Association has predicted that long-haul air travel will not return to 2019 levels before 2024. This is a long time for even the most profitable of airlines to survive this extended period of lowered demand.

Starting a new airline or keeping afloat an airline that was never profitable to start with makes no sense whatsoever. SAA has been a hopeless drain on the fiscus for decades and, arguably, should have been shut down long before the current crisis flattened the aviation industry.

When SAA was placed in business rescue last year – before the pandemic hit – there seemed little chance of the business rescue practitioners (BRPs) charting a course out of the turbulence it had been plunged into by years of mismanagement, corruption and union interference.

BRPs should be wholly independent, with the board, directors and company management accountable to them alone. If a practitioner feels there is no hope for a company they are under a legal duty to wind it up.

Yet, in the case of SAA, the BRPs appear to have been painted into a corner by a bullying government and unions to come up with a plan

– in an impossible domestic and international market – to settle SAA’s obligations and capitalise a new airline. The draft business rescue plan reportedly suggests it would take some R21bn to do so.

So how do you find an equity partner prepared to cough up this amount of money to fund a business in a failing market with zero prospects of any returns for at least four years?

The unions – who bayed the loudest for SAA to be kept alive – were the first to decline the opportunity to invest. With apparently no irony intended, both the metalworkers union’s Numsa Investment Company and the Mineworkers Investment Company say it would make “no commercial sense” to invest in an airline. Yet the unions expect the taxpayer to dig deep to do what they will not.

More than R30bn of taxpayers money has already been sunk into the national airline with little to show for it.

The BRPs are due to present their final plan to creditors this week. It seems unlikely they will have found a way to restore SAA to any semblance of profitability, either in its current form or some recreated future form. This phoenix is destined to remain mired in its ashes.

More than R30bn of taxpayers money has already been sunk into the national airline with little to show for it