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A Panacea for SAA?

A Panacea for SAA?

Yes - there is a panacea for South African Airways’ (SAA) woes. One that will end taxpayer bailouts and satisfy politicians’ silly desire to keep the flag flying and retain our national pride. But – and it is a big but – it will take courage.

SAA Boards have failed consistently. Political interference, corruption, bad management and lack of foresight have ensured that SAA is stuck in the past with planes and route strategies applicable to a bygone era. Closing a few international routes and deploying Mango on some domestic routes is re-arranging the deck chairs.

Combine this with mounting losses, negative equity, no working capital to buy new fuel efficient planes, lack of skills at all levels, a bloated overpaid workforce, chaotic internal systems, no control over inventories, a never ending need for taxpayer bailouts, a merry-go-round of new CEOs and turn-around strategies, constant political interference and a failure to grasp the realities of rapid developments in the aviation market mean that SAA will never rise again. And the pièce de résistance is the idea to merge with another bankrupt airline, SA Express.  Just think of it – someone actually believes that the solution to SAA’s problem is to merge it with another airline in the same dismal state and, ‘hey presto’, two failures will become a success! Absurd.

The government needs to get real about the need for a national airline as many others have had to do in recent years.

SAA is bankrupt and cannot be saved in its current guise. It is losing more than R5bn of our money every year and needs government funding of R21.7bn just to break even by 2021. Over 20 years, it has sucked R42.6bn (excluding guarantees of R19.1bn) from other far more deserving national priorities to subsidise the rich to fly.

But there is a possible solution. If a flag carrier is required, it need not be the current SAA. Why not another airline to fly in SAA’s colours with a commercial incentive to bring tourism, business travellers and foreign direct investment to South Africa, at the same time ensuring growth and jobs – and pay off SAA debts and liabilities without torturing the taxpayer any longer. Too good to be true?

Let’s call the new airline “South African International Airways Company – SAIAC”. The international business of SAA would be split from the domestic operation and SAA would become solely a domestic airline.

We can invite international airlines to tender to run SAIAC and the funds could be used to settle SAA’s loans and other liabilities. The incentive would be to take over SAA’s existing bilateral agreement and the highly valuable landing slots. SAA has failed to utilise many existing bilaterals while foreign airlines have apparently taken all they can in SA and are pushing for more.

The successful bidder would take over the staff and assets it desires and the “international” Voyager miles programme. Other assets would be sold off separately. Employees, not taken over by SAIAC, would be retrenched. A leading labour lawyer believes that the majority of staff would snap up the offer of a year’s package and retraining. Government would be responsible for all liabilities and guarantees but this would be offset by the tender funds.

Current legislation requires that this new airline would have to have a South African majority shareholder. Government would play no part in the new company so there would not be the political interference that has mired SAA in corruption and bad management. Losses and the drain on the fiscus would end.

And everyone will live happily ever after - the flag will fly; many jobs will be saved; the air miles programme will continue; thousands more tourists and business travellers will visit SA; jobs will be created; there will be significant foreign investment and SAA’s debts and liabilities will be cleared.

Obviously, many details would have to be worked out, but the principle remains: a new company, flying SA’s colours, able to compete against other international airlines and make a profit. Something SAA will never be able to do, no matter how many future bailouts.

By Terry Markman, a transport consultant and was on the Airline Deregulation Committee.

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