SAA 'is on verge of bankruptcy'Back to Forum
Maybe Mnangagwa needs to have a chat with his chum Mugabe and recover some of the billions stolen from state coffers during his decades of (mis)rule. Probably enough to fill every ATM in the country 10x over.
I don’t have much sympathy for SAA either, too long an instrument of the government, run by cronies and offering free flights to even more cronies. After all a politically connected idiot is still an idiot, and a politically connected idiot appointed CEO of an airline is still an idiot.
Sad for SA too, but the descent into the abyss seems unstoppable. I seem to recall Nene was supposed to be the financial saviour, that is until forced to resign due to his unfortunate memory loss (otherwise known as inability to tell the truth).26 Oct 2018
I am not, by any stretch of anyone’s imagination, anything approaching being a socialist, but I have just had a drinks catalogue delivered with the local rag, and there are bottles of whisky in there for upwards of R500,000. One is R649,500, that’s about £34500, and substantially more than most people in this country would pay for a car.
In a country where over 60% of the population live in shacks, there is something obscene about the looting that goes on in some areas, enriching those who can afford to dish out half a million rand for a bottle of whisky.26 Oct 2018
Poor old SAA. Flights between GB and ZA
As of today :
BA 2 x 388 daily to JNB
BA 4 x 788 weekly to JNB (day flight northbound)
BA 2 x 747 daily to CPT
BA 3 x weekly LGW – CPT
BA 3 x weekly LHR DUR
Also Thomas Cook LGW-CPT
VS 2 x 787 daily to JNB
SA : 1 x 330 daily.29 Oct 2018
SAA is a “vanity project” that the SA economy cannot afford and it should be sold, members of Parliament (MPs) have heard.
The standing and select committees on finance on Wednesday heard submissions from the public on the mini budget. The mismanagement of loss-making state-owned enterprises (SOEs) was one of the topics raised by unions and research groups.
Speaking on national airline SAA, economist professor Jannie Rossouw, who represented the Fiscal Cliff Study Group, was frank in his views that the SOE should be privatised.
“Give it away, it will not fly,” he told MPs.
‘Park the planes and wash them’
“We are tired of a vanity project.
“Politicians say they are proud to see SAA airplanes at international airports – park the things there and wash them. It’s cheaper than to try and fly them,” Rossouw implored.
He added that plans by government to merge SAA and SA Express was a strange idea – as he had never heard of two “bankrupt” companies merging to make a success.
He stressed that taxpayers could no longer afford to finance the airline through bailouts from Treasury.
Cosatu’s parliamentary coordinator, Matthew Parks, also shared views on SAA’s bailouts. “We don’t agree with endless bailouts,” he said.
However, government is pressured to prevent the State from collapsing if SAA’s debt is recalled.
The situation at SAA has resulted from corruption and looting and wasteful expenditure which must be dealt with, said Parks. “It’s not the stewardesses who looted, it’s management and their friends.”
READ: No holy cows as Mboweni says reconfigure fiscus-draining SOEs
Parks further called for detailed and clearer turnaround plans for troubled SOEs. The corruption of the past must also be dealt with and stolen money should be recovered. “We want to see those people who looted, sitting in Pollsmoor (prison) in orange overalls.”
Too much damage
SAA has been issued a R19.1bn government guarantee, of which R14.5bn has been used. If SAA defaults on its loans, the liability will fall on the fiscus, which will impact the sovereign credit rating and lead to a downgrade, secretary general of Fedusa Dennis George explained.
For this reason, George said Fedusa supported the R5bn extended to the airline by government to repay debt.
Matt Johnson of the Organisation Undoing Tax Abuse (OUTA) said extreme mismanagement at SAA meant that it was “almost beyond repair” and instead of injecting more money, privatisation would be a better option for government.
SAA is one of the worst examples of dysfunctional SOEs, he added.
“Despite the new management, new leadership, too much damage has been done,” he said.31 Oct 2018
Report in Travel Weekly today:
Loss-making South African Airways “should be shut down.”2 Nov 2018
Rivals are strangling SAA’s long-haul business
There is simply very little reason to fly the flag carrier anymore …
Hilton Tarrant / 6 November 2018 00:45 27 comments
Government’s contention that SAA is strategically important and an ‘enabler for tourism’ no longer holds water. Picture: Shutterstock
Fifty-six. That’s the number of long-haul return flights operated by state-owned carrier SAA each week, with daily outbound and inbound flights between its Johannesburg base and London, New York, Washington (three via Dakar, four via Accra), São Paulo, Frankfurt, Munich, Perth and Hong Kong.
Fifty-six seems a fair amount, until you start comparing this figure to those of rival airlines. Emirates operates 56 return flights to South Africa (Johannesburg, Cape Town and Durban) a week. This summer, British Airways will operate 38 return flights a week (also to those three destinations).
This is not only a numbers game, of course. It would be far more preferable to run a truncated but full – and therefore profitable – long-haul network. Except airlines are a volume business.
And these aren’t apples-to-apples comparisons. Emirates operates an Airbus A380 on one of its four Joburg flights daily, while British Airways now flies two A380s a day between Heathrow and OR Tambo.
The planes SAA operates on its long-haul routes seat between 249 and 317 passengers. On the London route, its A330-300 seats 249. That’s 1 743 seats (to London) a week. British Airways, its direct competitor on this route, has 6 566 seats available a week, just on the twice-daily A380. Add in the 856 seats from four Boeing 787 flights a week and that totals 7 422, more than four times SAA’s capacity!
Virgin Atlantic, which is leasing SAA’s Heathrow slot, enabling it to fly twice daily from Johannesburg, offers more than double SAA’s capacity, with 3 696 seats (one way) each week.
Johannesburg to London
Return flights per week Seats per week (one way)
British Airways 38 7422
Virgin Atlantic 14 3696
South African Airways 7 1743
Gulf – and other – hub carriers have also increased frequencies and added routes at a staggering pace, mopping up demand while SAA shrinks. Aside from the 56 return Emirates flights to South Africa weekly (28 to Johannesburg, 21 to Cape Town and seven to Durban), Qatar operates 28 flights to the three cities, Turkish Airlines a further 18, Ethiopian 21 (to Joburg and Cape Town), and Kenya Airways 21 to Johannesburg (smaller Etihad only flies once daily from Johannesburg). That’s a total of 144 return flights, nearly three times SAA’s entire long-haul schedule.
It’s not just the direct competition on long-haul routes to Johannesburg that’s throttling SAA. The state-owned carrier’s long-haul strategy seems to be premised on all flights operating from Joburg.
Increasingly, rivals are flying direct to Cape Town as well as Durban, further weakening SAA’s position. During (our) summer, British Airways flies twice a day between Heathrow and Cape Town and, given the constraints around landing slots at Heathrow, has added three flights a week from Gatwick Airport in London. Last week, it started flying direct between Durban and Heathrow three times a week.
Probably the biggest mistake ever made by SAA regarding its long-haul business was selling the valuable Heathrow landing slot for its Cape Town-London flight in 2012.
With the direct options from Durban (Emirates, Qatar, British Airways and Turkish Airlines), there’s very little reason to fly overseas via Johannesburg. And from Cape Town, there’s practically no reason.
The Western Cape Government’s Cape Town Air Access initiative from 2015 via agency Wesgro has been an astonishing success. There are direct flights from Cape Town to the UK, three destinations in Germany, Switzerland, France, the Netherlands, Austria (!), Dubai, Turkey, Qatar, and Hong Kong.
These flights to/from Germany (and, from last month, Austria) mean there’s precious little reason for German tourists to fly to the Cape via Joburg. How long SAA will be able to sustain direct daily routes to both Frankfurt and Munich remains to be seen.
The new seasonal direct route to Hong Kong (Cathay Pacific) from Cape Town (three times a week between November and February) will put further pressure on SAA’s only route to the Far East.
Regional stronghold under threat
And SAA’s only real remaining stronghold – its regional flights to African destinations, where it is often the only operator – is increasingly under threat.
Wesgro has also been successful in getting African airlines to fly directly to Cape Town, with flights from Botswana (Gaborone on Air Botswana and Maun on Airlink), Zimbabwe (Victoria Falls on Airlink or Kenya Airways, and Harare on RwandAir), Zambia (Livingstone on Kenya Airways), Rwanda (Kigali on RwandAir), Angola (Luanda on TAAG), Namibia (Windhoek and Walvis Bay on Air Namibia) and Mauritius on Air Mauritius. Many of these routes are operated daily, which is surely placing some pressure on SAA’s regional load factors.
Airlink also shuttles inbound tourists between Cape Town and the Kruger National Park (Hoedspruit, Skukuza and Nelspruit). This means that tourists from Europe and Asia can fly directly to Cape Town, then to their ‘safari’ in the Kruger, Botswana or Vic Falls, then return to Cape Town to fly out.
A decade ago, often the only option to do this would be on SAA, via Johannesburg.
Government’s oft-repeated contention that SAA is strategically important and an “enabler for tourism” no longer holds water. Tourist arrivals are increasing in spite of SAA, not because of the state-owned carrier.6 Nov 2018
Thank you for responding so quickly.
It was quite long, it was an article from a local business publication, here is the URL :
1 user thanked author for this post.6 Nov 2018
Chatting to an SAA pilot this weekend, he told me one of the prime reasons for the ANC not privatising SAA is that their free travel perks for ministers and MP’s etc would go and they would have to pay their own way!
From a passenger point of view i find their fares totally uncompetitive and flights to regional airports totally unreliable. Many a friend has missed their long haul connection ex JNB thanks to delayed and cancelled flights from George. Not just that, but you have no lounge access flying SA Express as they say they are not part of Star Alliance, despite the fact the ticket is booked and issued through the SAA website and only shows SAA not SA Express.6 Nov 2018
A pipe dream. The ANC thieves will never relinquish control with all the ill-gotten gains that it provides them with. Their snouts will remain firmly stuck into the trough.
R21-Billion Private Loan to SAA Proposed with Important Caveat
A consortium of local and international investors have reportedly proposed a R21-billion private loan to South African Airways (SAA)… on condition that the consortium receives a 51% equity share in South Africa’s national carrier (which would effectively mean the government – which has in recent years mismanaged the airline – would have to hand over control).
Alf Lees – DA Shadow Deputy Minister of Finance – said in a statement Sunday morning that the offer, which appears very attractive, could only work if certain conditions are applied.
The DA says the R21-billion loan to SAA from the consortium must:
not be backed by any government/taxpayer guarantees; and
be used primarily to extinguish all existing loans to SAA that are backed by government/taxpayer guarantees.
require that all existing government/taxpayer guarantees of R 19.1 billion be withdrawn from SAA and no further guarantees must be issued.
Lees said that the DA will write to Finance Minister Tito Mboweni to urge him and cabinet colleagues to carefully consider the proposed R21 billion private loan.
Lees claimed the offer may be too good to be true and the “only solution will be to put SAA into business rescue”
“SAA is bankrupt and is only able to continue trading as a result of lenders having allegedly at the eleventh hour, provided short-term funding of an additional R3.5 billion until the end of March.”
This will bring the SAA loans, repayable by the end of March 2019, to R13 billion.
Lees questioned the legality of the additional R3.5 billion – which he said was presumably arranged on a “letter of commitment” from Mboweni… meaning it has been paid to SAA from the 2019 budget before parliament has approved this budget.
The bright side of the SAA loan
However Lees did acknowledge the attractive side of the proposed R21-billion loan – which is that it would mean the ANC government “loses all influence over SAA which would be free to conduct business without political interference that has dogged the airline in the past”.
1 user thanked author for this post.23 Dec 2018
To put this in context, ZAR21 bn is +- USD 1.5bn. Not really a large amount for what could be an incredible business opportunity.
Conditional on the loan should be the current board and top management (with a few exceptions) step down without compensation.
Mass redundancies being allowed.
This would then allow SAA to reopen some CPT to Europe route, as well as several other cities such as Paris, AMS, Milan from JNB.
Absorb SA Express to cut expenses and so through bookings can be made to all South African destinations and increase frequencies on George – CPT/DUR/JNB especially in the summer months. Those new routes would then mean new employment opportunities and revenue.
Fingers crossed.24 Dec 2018
So the latest way to sort out SAA is to split the airline into three units – International, domestic and regional – each with their own management structures.
I kind of get how that could improve accountability but would it not also increase overheads and become even more overstaffed than it already is?18 Feb 2019