Opinion: Let's hope dreams of a private sector-run SAA come to fruition
Opinion / 25 November 2019, 07:00am / Sello Rasethaba
JOHANNESBURG – I the late 1990s Swissair began experiencing difficulties. A Swissair airliner flying from New York City to Geneva, Switzerland, caught fire and crashed off the coast of Nova Scotia, Canada, in 1998, killing all 229 people aboard.
Although investigators were unable to confirm the cause of the accident, they suspected faulty wiring.
On the afternoon of October 2, 2001, Swissair’s planes were grounded. The once-proud Swiss national carrier, which had been in business for 71 years, no longer had enough money in the kitty to pay airport taxes or buy fuel for its aircraft.
According to reports, “around 39 000 passengers suddenly found themselves hostages of the situation. The damage to Switzerland’s reputation was huge. Even today those in charge of the company at the time still blame each other for the debacle.”
Swissair’s rapid expansion during the 1990s led to financial difficulties, which were exacerbated by the decrease in travel following the September 11, 2001, attacks.
In late 2001 Swissair entered bankruptcy and on March 31, 2002, it ceased operations.
Crossair, Swissair’s regional carrier, and other elements of Swissair were reorganised to form Swiss International Air Lines (Swiss). The airline became part of the Lufthansa Group in 2005.
“In the case of UBS Bank, everything was done to save the group as a whole, while in the case of Swissair nothing was done at the decisive moment,” the last Swissair chief, Mario Corti, said in a television interview.
Currency issues played an important role in Swissair’s history: the airline needed to be saved by the taxpayer after the devaluation of the British pound in 1949 and suffered heavily from the collapse of the Bretton Woods Monetary System in 1971.
The demise of the airline after 1990 can be explained partly by a change in the market environment. However, according to Jean-Paul Rodrigue, a professor at Hofstra University and an expert in transport geography, “Transport modes are the means by which passengers and freight achieve mobility. They are mobile transport assets and fall into three basic types: land (road, rail and pipelines), water (shipping) and air."
South Africa is still reeling from the privatisation of Safmarine in the 1990s. Our disparate answer is Operation Phakisa. However, South Africans live for the moment. We do not learn from history.
A narration is being flouted that the funding of SAA is subsidising the elite.
The proponents of this story do not realise that as Rodrigue points out, “transport modes are designed to either carry passengers or freight, but most modes can carry a combination of both".
“For instance, an automobile has a capacity to carry some freight, while a passenger plane has a belly-hold that is used for luggage and cargo. Each mode is characterised by a set of technical, operational and commercial characteristics…
"The demand for transport and the ownership of modes are dominant commercial characteristics.”
We are successful in this because SAA links us with the world, particularly countries with poor rail and road infrastructure.
South Africa is party to the African Continental Free Trade Agreement (AfCFTA), which aims to accelerate intra-African trade and boosting Africa’s trading position in the global market. AfCFTA’s $3 trillion (R44trln) trade growth potential hinges on an efficient transport and logistics programme encompassing all modes of transport, including air. A weakened SAA will weaken South Africa’s role in AfCFTA.
Finance Minister Tito Mboweni said an interview with Power FM, “Close down SAA and start a new airline,” but after the lessons of Swissair this is not helpful at all.
Reports in various media outlets state that trade union Solidarity has revived its plans to place SAA into business rescue. “If Solidarity’s application is successful, it would be the first time that a state enterprise is placed in business rescue.
"This will mean that the court can appoint a business rescue practitioner with comprehensive powers to rescue the airline,” the union said.
The business rescue procedure is described as: “An effective mechanism to rescue financially distressed companies. The process allows one to take failing companies, restructure them within the confines of the act and place these companies back into the South African economy. This must ultimately be good for the company, creditors, employees, obviously for the company itself and for the South African economy!”
Is this the best way to go? Business rescue is not always successful.
Back to the Swiss example, the airline now appears to be on solid ground, booking full-year profits of SFr368 million (R54 billion) in 2010, compared with SFr146m in 2009.
Today, Swiss is a different animal airline of Switzerland, serving more than 100 destinations in 44 countries worldwide from Zurich and Geneva and carrying almost 18 million passengers a year with its fleet of around 90 aircraft. The company's Swiss WorldCargo division provides a comprehensive range of airport-to-airport airfreight services for high-value and care-intensive consignments to some 175 destinations in more than 80 countries.
Let’s pray that Mboweni’s dreams of a revived SAA run by the private sector as “the Airline of South Africa”, which embodies traditional South African values are realised. Hopefully South Africa will not end up like Chile as portrayed in the documentary Chicago Boys, where a group of Milton Friedman’s economic disciples backed by a military dictatorship turned Chile into the first and most extreme neoliberal country in the world.
Of course, the worst scenario is a situation similar to “Chile protests” of 2019, “How a $0.04 metro fare price hike sparked massive unrest in Chile”, with unrest where thousands of people in South Africa will take to the streets to protest against the government of President Cyril Ramaphosa.
Sello Rasethaba is the chairperson of the African Entrepreneurs Council.