South African Airways In Rush To Secure $139m

Troubled flag carrier South African Airways is rushing to secure the $139million it was promised by the South African government, before its too late. The government promised 2 billion rand ($139 million) to prevent the airline from collapsing. However, unions say that if the government can’t supply the money soon, the airline may have to stop flying.

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South African Airways desperately needs money from the government. Photo: Airbus

South African Airways has been in trouble for a while now. Not only has the airline been bleeding money, but it was also recently hit with strike action which worsened the situation further.

Last month the airline entered a form of bankruptcy protection in order to protect some 10,000 jobs. It secured funding of 2 billion rand from the government as well as 2 billion rand from lenders. Lenders have coughed up the money but the government has yet to pay.

Despite the $139million from lenders, the airline says it has no more money and needs the funds from the government immediately. Trade unions have now said that, unless the government can get its hands on the money, the airline will be forced to cancel flights.

National Transport Movement president Mashudu Raphetha told Reuters that the initial deadline of 19 January needs to be met in order to save the national carrier.  However, in a contrary statement, an announcement from the business rescue practitioners in charge of saving the airline has said that “The liquidation of SAA is not one such current scenario.”

Raising money

The money from the government cannot come soon enough for the struggling airline. South African Airways is also in the process of trying to raise its own money. Yesterday, Simple Flying broke the news that the airline has put nine aircraft up for sale as well as 15 spare engines and four APUs. But time is still of the essence. Interested parties only have until the end of the month to express interest in any of the sale items.

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The airline is selling several of its old Airbus A340s. Photo: Airbus

Canceling flights

The airline has stated that unless it receives the money from the government, it will be forced to cancel flights and delay paying staff salaries. But this threat may already be a reality. The aircraft which are being sold by the airline are active aircraft. They are still supposed to be flying. This begs the questions, how can the airline sell active aircraft and not suspend flights?

The airline has several new Airbus A350s in its fleet so, hopefully, the plan is to sell the old planes and switch in the newer, more economical aircraft. This would raise immediate capital and save money in the long run with less spent on fuel. But the airline has not announced how it plans to go about facilitating these changes and has not notified of any changes to its schedule.

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The Airline has taken delivery of several new Airbus A350s. Photo: SAA

While the sale may take some time to generate any money for the airline, the airline still needs the government’s funds to continue to run its day-to-day operations. Without this funding, staff may find themselves without pay. If the airline has to deal with more strike action from staff resulting in canceled flights, this may be a very real end to the long, sad story of the national carrier.

Why is the airline in trouble?

The struggling airline has not made a profit since 2011. That’s a long time to be reliant on the government’s support. The airline also has a massive amount of debt; almost 13 billion rand ($901 million) in August last year. Several factors have been blamed for the airline’s failure including; government corruption, South Africa’s geographical position meaning it cannot offer connecting flights, and stiff competition from European and middle eastern carriers.

SAA and BA heathrow
The airline faces stiff competition from UK flag carrier British Airways. Photo: Mike McBey via Flickr

Assuming the government’s plan to bail the airline out of trouble is successful, the airline will still have to face the competition and it can’t do much about the country’s location either. So, while the restructuring takes place behind the scenes, the airline will need to try to stay in the sky. If the airline is forced to give up routes during to lack of funding, competitors may jump in to offer more routes, effectively closing the airline out of the market.

Getting the airline back on its feet will be a big job. Even if the airline gets the government funding within the coming weeks, it may not be enough to save the airline. But what do you think? Do you think the government money will be enough to save the flag carrier? Will the airline get the money at all? Let us know in the comments below.