SAA business rescue practitioners revealed their plan to save the troubled airline and want the new SAA to retain 1 000 of its 4 708 staff. Simphiwe Mbokazi African News Agency (ANA).
SAA business rescue practitioners revealed their plan to save the troubled airline and want the new SAA to retain 1 000 of its 4 708 staff. Simphiwe Mbokazi African News Agency (ANA).

Scavenging for gains in SAA’s ashes

By Alex Mashilo Time of article published Jun 22, 2020

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Much of the reportage and opinion pieces broadcast by certain sections of the mainstream media on the crisis that SAA found itself in, propagated for its liquidation.

This reflected embeddedness, which, in addition, came across as having benefited from a high level co-ordination involving manipulation of selective insider information and behind the scenes manoeuvring.

An internet search entry of the SAA business rescue reveals many results. The voice of those who favoured rescue and turnaround was marginalised.

In many instances, that voice was relentlessly attacked without its content being given space.

The propaganda blitz was in full swing, vocally buttressed by sections of monopoly capital interested in scavenging for gains from “the ashes of SAA”. This agenda was exposed more than ever by the turn of events in favour of rescue, restructuring and turnaround.

It has been very clear from the beginning that SAA was in a position to be turned around.

What was required was a correction of past governance and policy weaknesses. The airline has good assets. It has very strong intellectual property. It has accreditation by different aviation authorities, an air operator certificate and global operating licence - passengers and cargo.

It has 86 years of global presence. It has global alliance partnerships, interline and bilateral agreements, routes and lucrative slots. It has a very strong airline loyalty programme, the first amongst the other airlines operating in the country. This is attached to the brand, the SAA tail which came with the transition from apartheid to the current democratic dispensation - a breakaway from Springbok/SAL tail.

It has flight and landing rights and owns subsidiaries and associated assets. It has other movable as well as immovable assets - including land. It has training facilities and expertise, and globally recognised clean records in safety, for example. All of these were going to be lost.

Establishing a new airline is not child’s play. Most of SAA’s good assets may sound trivial, but they take time to build or acquire in the global aviation industry. Deliberately destroying into ashes an airline that has good assets in order to start a new one was both unwise and going to be costly.

The reasonable option has therefore always been that of rescuing and turning SAA around. The champions of liquidation were obviously heartless. They, for instance, had no regard for the thousands of workers employed at SAA, their families and their livelihoods. To them, SAA workers are not important - they are an “elite-serving, inconsiderable non-factor”.

Turning around SAA would require a whole-of-state aviation industrial policy approach, in addition to adequate support including recapitalisation of the national airline to stand on its own feet. This is the most important outcome towards a viable and thriving national airline in this era of globalisation where the aviation industry plays a key role in international trade.

Thinking about the rescue of SAA should therefore be developmental, and must include changes in the regulatory framework and the way state agencies in this sector do things. Above all, SAA should develop working class flight products. Its turnaround should be linked with a wider strategy to achieve an affordable, safe, reliable and integrated public transport system.

This system must bring road fatalities down south and reduce the time the working class spends on long distance roads. The adoption of such a strategy will go a long way in saving lives and supporting our economy. These are the factors the propaganda blitz does not have regard for.

The exposure of the propaganda blitz revealed several other key features. First, its attention to corruption is not on the whole picture. It is selective. Furthermore, it does not look at the political economy of corruption and the self-enrichment interests based in the private sector as an integral part of corruption’s motive forces.

In order to deal with corruption, it should not matter who is involved in it, and whether they are in the public or private sector.

Second, the propaganda blitz does not go back historically and deep down to the structural roots of the crisis facing a number of state-owned enterprises (SOEs). Third, bad governance is treated with exactly the same bias. Fourth, the propaganda blitz does not problematise the macro-economic framework followed since 1996 as part and parcel of the factors underpinning the development of the crisis facing the affected SOEs. Fifth, while making reference to political factions, the propaganda blitz seeks to conceal its own location in, and activism, as an extension of those factions.

History will delve deeper into the above issues. A few items, for now, are historically important to highlight.

In May 1998, Coleman Andrews, who came from the US, was appointed SAA chief executive. He served for about one and a half years in that position. Coleman was paid R220 million, reported the IOL in June 2001.

This information challenges all those interested in producing an objective analysis and reporting news accurately to go to the roots of the crisis that the national airline found itself in. SAA sold a number of aircraft during Coleman’s tenure as its chief.

Instead of an adequate balance between owned aircraft and leased aircraft based on fuel efficiency and low maintenance cost, SAA was inserted into a path more dependent on monopoly aircraft lessors, with its fleet including high maintenance and fuel consumption flying machines.

Andrews must have been all smiles with the millions of rand that he was paid. Meanwhile, according to a parliamentary briefing report on Transnet and SAA from a session held on October 30, 2001, SAA made a loss of R302m in 1998, the year in which he was appointed.

The sale of its aircraft obviously brought in revenue - however, headline earnings revealed a loss of R23m in 2000 and R735m the following year. As noted in the report, headline earnings exclude revenue generated from the sale of the assets - a non-core activity.

Before it was established as a separate entity, SAA was part of the Transnet group comprising Spoornet, SAA, Portnet and Metrorail. There are two points in this historical background that draw the attention of those seeking to develop an objective analysis.

First, SAA was not adequately capitalised when it was established following its unbundling from the Transnet group. A recent (“leaked”) draft report by the business rescue practitioners points to the problem of inadequate recapitalisation of SAA. This did not start after their appointment in December 2019, however.

Second, the macro-economic framework that was followed since 1996, like it happened in the case of Eskom - which is now in the midst of a debt crisis, pushed the affected SOEs into the yoke of profit-seeking financial markets.

This altered their orientation, and in addition laid the foundation for the development of their debt crisis because of the rising impact of primary debt plus interest rates.

In the case of Eskom, finance

(primary debt plus interest rates) is

the second-largest cost driver after

coal procurement.

* Alex Mashilo is SACP central committee member for media and communications.

** The views expressed herein are not necessarily those of Independent Media.

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