South African Airways (SAA) has reached the end of the line for receiving funds from the South African government. On April 14th, the business rescue team circulated a letter to affected parties indicating that the government had denied additional funding to keep the loss-making airline afloat any longer.
No additional funds for SAA
Reuters reports that the South African government told the airline’s rescue team that it was unable to provide funding to keep the carrier afloat any further. While the airline has not yet folded, the rescue team continues to evaluate options and impacts on the carrier.
For nearly 10 years, South African Airways has not turned a profit and has relied on bailouts from the government. These have amounted to 20 billion rands (or just shy of US$1.1bn) in the last three years alone.
Is South African Airways near the end?
The outlook is bleak for the carrier given this latest development. Amid the global downturn in aviation, nearly every carrier is seeking to find funds to keep them afloat. It is unclear if anyone will come to SAA’s rescue.
The ailing flag carrier has made strides to try and improve its operations. This has included upgrading some A340 services to a more fuel-efficient and newer A350. And, the airline did set out a plan to offload the A340s from its fleet. However, those efforts appear to be too little too late.
Furthermore, the carrier has largely not been competitive. Its short- and medium-haul products are far from exciting. Moreover, the carrier has suffered from inefficient operations.
Without additional funding, it does not appear that the carrier has much room for survival. There is still, however, some hope that the carrier could find private sources of funding. But, given the airline’s struggle to attain profitability, even during some of the best years in the industry, it is highly unlikely that anyone will come to rescue it when the industry is facing its worst year in history.
What if SAA collapses?
The largest carrier in South Africa is SAA. Between the flag carrier and low-cost carrier, Mango, the two offer the most comprehensive network of connections between South Africa and the wider world. SAA flies to several key destinations including New York, London and Perth. In recent years, the carrier also flew to places like Sao Paulo and Hong Kong, although those were cut in an effort to return to profitability.
Without South African Airways, South Africa will be reduced to Airlink, Comair, and SA Express. Neither of these three offer comprehensive international route networks. And, SA Express has also seen some difficult times.
If SAA does collapse, which appears as if it may happen sooner rather than later, it would leave a void in South Africa’s airspace. Foreign carriers like KLM and Lufthansa may view this as an opportunity to fill in the gaps left behind. However, for new carriers in the market, it will likely be an opportunity for a year or two out given the current state of the industry. This would leave South Africa relying on a handful of international carriers for connections abroad which, in turn, could lead to higher fares and potentially lower tourist numbers.
What do you think will happen to South African Airways? Let us know in the comments!