SAA nosedive likely to end in yet another bailout

While South African Airways (SAA) dithered over how to respond to its latest crises yesterday, it may have to plead with government for another bailout to avoid the complete collapse of the airline, which could have easily been avoided by taking accountability and playing an oversight role.

According to political analyst Daniel Silke, the strike caused a “vast amount of brand damage”, which had the potential to collapse everything.

To add to SAA’s woes, on Thursday travel insurance company TIC withdrew its cover of SAA yesterday and major travel agency Flight Centre has reportedly stopped recommending SAA to its customers.

Jason Veitch, head of travel insurance at TIC, said it had to withdraw the insolvency cover benefit due to the worsening risk outlook and the potential bankruptcy of the airline.

“The risk associated with SAA’s going-concern status has been an issue for many years,” Veitch said. “The decision to withdraw cover was not taken lightly.

“The management of TIC has been in constant communication with the leadership of SAA concerning the challenges facing the airline to try to find a solution that avoids TIC withdrawing cover.”

Veitch said they would monitor SAA’s progress as it implemented a strategy to improve its situation. Flight Centre Travel Group MD for the Middle East and Africa Andrew Stark told The Citizen in light of doubts concerning the long-term viability of the airline, he had decided to stop selling SAA tickets as he was concerned about the messages from the government regarding the airline receiving the bailout.

Stark said several other global insurers had taken a similar approach.

On Twitter, African Defence Review director Darren Oliver said if SAA collapsed, the other carriers “don’t have the capacity to expand fast enough to fill the lost flights”.

“It’ll take months, at best, more likely years, and that doesn’t include the regional and international flights. SAA collapsing will result in negative follow-on economic effects,” Oliver said.

Silke said bookings would be severely affected in terms of business confidence.

“Tourists may also feel like all the transportation in South Africa is in trouble. We are most likely to see other additional service providers pulling out from working with the airline until there is more certainty.”

SAA owes R40 billion that needs to be settled immediately, but it has no cash in its reserves.

The department of public enterprises said this week the strike at SAA had resulted in a sudden deterioration of SAA’s financial position and they were focused on ensuring the airline was stabilised in the short term.

Silke said it was the problem of government as the major shareholder at SAA.

It must make a choice whether to bail it out or reconstitute it as a smaller machine, which was still going to lead to job losses.

“It is a tough one for the government, given the fact that they failed to provide oversight inspection to the airline – which should have helped them to see mismanagement 10 years ago.

“Poor South Africans have bailed out SAA many times, but should they continue to bail out the airline that is poorly managed?” Silke asked.

Xubera Institute for Research and Development analyst Xolani Dube said it was time for government to look beyond political deployment and send the right people to rescue the airline – without any political interference.

“Everything is now against the workers and it is not their fault,” said Dube. “What needs to be done now is for the government to be responsible.

“They have managed to find the money for the staff’s salary increase. Surely they can do something about SAA.

“The problem now is a question of capacity to do the job and if they look beyond political deployment, they will find the right people to guide what needs to be done.”

– news@citizen.co.za

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