No travellers were in sight at OR Tambo SAA desks yesterday after the airline cancelled some of its domestic and international flights due to low demand and a cash crunch.  
Picture: Nokuthula Mbatha African News Agency (ANA)
No travellers were in sight at OR Tambo SAA desks yesterday after the airline cancelled some of its domestic and international flights due to low demand and a cash crunch. 
 Picture: Nokuthula Mbatha African News Agency (ANA)

SAA goes into a ‘death spiral’

By SE-ANNE RALL Time of article published Jan 22, 2020

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Durban - The cancellation of several domestic and international flights by SAA could signal the beginning of the end for the embattled state-owned airline.

This is according to economist Dawie Roodt when reacting to the latest crisis facing another state-owned enterprise (SOE).

Roodt said the airline was on a death spiral and political interference had destroyed its corporate history.

Political analysts believe that the move has dealt a massive blow to the country at a time when leaders were taking part in the UK-Africa Investment Summit.

Yesterday, SAA announced that it had cancelled several domestic flights between Durban, Johannesburg and Cape Town and flights between South Africa and Munich until Friday.

SAA spokesperson Tlali Tlali said the decision was in line with SAA’s usual policy of reviewing flights and consolidating services with low demand.

“Furthermore, during the current process of business rescue, these cancellations represent a responsible strategy to conserve cash and optimise the airline’s position ahead of any further capital investment,” he said.

Tlali hinted at the possibility of further flight cancellations, saying they would be reviewing further possible flight schedules in the coming days.

Roodt said SAA could not be privatised, and that the only way out would be for the cash-strapped airline to be liquidated.

“The fact is the ANC has done an absolutely horrible job of managing state-owned entities. They have destroyed SOEs financially and ruined their corporate history and memory. They have also destroyed the management of these entities. The ANC will not allow these entities to be saved because they use it for patronage. This is a massive mess,” he said.

Roodt said the ANC hoped to have kept SAA alive for as long as possible to suck it dry for their friends.

“Eventually SAA went into business rescue because they were forced by circumstances and Solidarity - which applied for business rescue. The government’s hand was forced,” he said.

Roodt said the only way for SAA to regain any confidence would be if politicians were kept far away from the business.

He said the cancellation of flights was a necessary decision by SAA simply because people were not buying tickets to fly with an airline that they did not trust.

“There is not enough interest in ticket sales and simply put, the airline is on a death spiral,” Roodt said.

Air transport economist, Dr Joachim Vermooten, said privatisation was an option that could be considered.

“If you look at the previous generation of European airlines, they are privatised because it’s too costly to maintain an airline.

“There is always a need for new capital, and those costs exceed what you can use from past earnings.

“You need access to capital markets and that is why most of the bigger airlines are listed. This is a better system than what we have here,” he said.

Vermooten said he did not believe that SAA could recover from the recent losses and if it did, it would be on a much smaller scale.

Political analyst at the University of Stellenbosch, Ntsikelelo Breakfast, said the reality was that SOEs were falling apart.

“There is no political will from the government and the way things are is not the way they should be. SAA has benefited from bailouts and those bailouts have not achieved the intended objective,” he said.

Breakfast said the cancellation of flights dealt a massive blow to investor confidence.

“Many investors will invest in theory but there’s room for them to change their minds. People don’t want to invest in a place that doesn’t have stability or at least show signals of progress,” he said.

IFP spokesperson on Public Enterprises, Inkosi Mzamo Buthelezi, said a bailout was not the solution to save SAA, adding that the airline should be partially privatised.

“A bailout is not the solution to save SAA, if government goes ahead it would simply be wasting money we don’t have,” he said.

DA spokesperson on Public Accounts, Alf Lees, called for SAA to be liquidated.

“SAA is bankrupt and has been for a very long time. It’s in debt to the extent of some R20 billion. It has no cash reserves, it is unable to meet its current liabilities (including salaries) and still requires more bailouts funded by taxpayers.

“National Treasury is simply not able to keep the failed public enterprise afloat, and the current cash crisis was always inevitable,” he said.

Last month, it was reported that SAA would get R2bn in cash from the Treasury and another R2bn loan guarantee to raise funding from commercial banks to facilitate the process of business rescue.

SA Tourism chief executive, Sisa Ntshona, called on stakeholders in the tourism sector to support the efforts being made by the airline to manage the issue and to assist with efforts to inform passengers of the changes.

“SAA provides direct airlift from key SA tourism source markets around the world.

“The potential loss of this direct airlift capacity and domestic connectivity could potentially have an adverse impact on our arrivals and geographical spread objectives, and hopefully the lost capacity will be taken up fully by alternative airlines,” Ntshona said.

The Mercury

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