Continued bailout of troubled SAA makes no sense

It is a question to which there are no uncomplicated solutions, but one which we feel should nevertheless be asked: why should the hard-pressed South African taxpayer continue to pour what amounts to bailout money into an airline which is, to all intents and purposes, technically bankrupt?

In his budget speech, Finance Minister Pravin Gordhan painted a somewhat upbeat picture of what lies ahead for South African Airways (SAA), but added the caveat to any turnaround that the new board must act responsibly and appoint a new chief executive and chief financial officer.

Gordhan also seemed at odds about where the additional funding would come from to service SAA’s debts, which have ballooned to R47 billion.

“We will make the equity injection SAA needs, but I can’t say yet where the equity injection will come from,” was way the minister framed it. We are not for a moment suggesting any robbing of Peter to pay Paul as a possible solution to the conundrum facing Gordhan, but we are as much at a loss as the minister appears to be.

While it might be true in an ideal world that a flag-carrying national carrier offers a level of international prestige, if it continues to bleed huge amounts from the fiscus, it needs to be looked at with a critical eye, more than as an uneconomic ego booster. And if the airline is to be privatised as has been a long-term call, jobs would inevitably be shed.

But we also need to understand that we are not in the league of carriers who fly out of Dubai and Abu Dhabi – and bear in mind that all the Gulf states in the United Arab Emirates have zero taxation – and clearly cannot compete in the economies of scale these carriers can wield through multibillion orders lodged with aeronautical heavyweights.

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