Fate Sealed? Government Rejects Funding To South African Airways

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South African Airways (SAA) has been in a terrible financial situation for nearly a decade. While South Africa should be a big aviation market, South African Airways has an inefficient route network and there are many reports of corruption and mismanagement. In fact, the airline has gone through five CEO’s in the past 8 years. In other words, they’re a hot mess.

SAA’s fleet is also filled with older, less fuel-efficient planes but they have been making strides to update as they recently acquired a few A350s.

THE BAILOUT(S)

In early 2019, SAA received a huge cash boost of R5.5 billion (~$3.7 USD billion) from the government, adding to numerous bailouts over the past several years.

But it appears the airlines financial past is going to be their undoing as the South African government has, essentially, said it has bigger problems to deal with (i.e. COVID-19) when asked for another bailout from the airline.

MAJOR CONCERN COVID-19

Yesterday, Bloomberg reported the administrators at SAA were told not expect additional funding and to seek financial resources elsewhere.

However, there’s a slight challenge with that request…SAA has not been able to secure funding from investors during good times, hence the reason the government has bailed them out. Therefore, I highly doubt they’ll be able to find investors during the worst global pandemic ever.

South Africa’s Finance Minister has long advocated cutting the airline off financially, and earlier this week cited the carrier’s closure as a way to save funds as the country deals with the global pandemic. In other words, reallocating the “bailout money” to sustain the country is far more important than saving the jobs of the employees at SAA.

FINAL STAMP

This is a sad development as this presumably means SAA’s days are numbered.

Given the SA government does not appear to be interested in bailing out the airlines and the chances of finding a private investor during the worst pandemic ever is slim, I can’t imagine South African Airways survives 2020.

Although the airline may not have been profitable, it may still have been a net-positive for South Africa in terms of the access it provided to the country but COVID-19 has leveled the playing field globally.

Although they are not an industry leading airline by any means, I have always enjoyed my experiences on South African Airways.

What do you think will happen with tourism in South Africa with no national airline?

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