The troubled airline, South African Airways, has been floundering for years. Its woes have seen catastrophic losses and very little sign of a possible upturn. No other airline wanted in – rare considering they did have aircraft assets – and this seemed to seal its fate.
However, after the current CEO delivered a proposal last year to stem the cash hemorrhage, they were lucky enough to get a government cash injection. But as it turns out, this wasn’t enough to save them. Reports from the City Press/ News24, South Africa’s dominant news source, claim the South African Airways bankrupt stories are accurate. So what’s in store for them this time?
A quick tally up of South African Airways
South African Airways (code SAA) is the South African flag carrier airline. It serves 56 destinations in South Africa, Africa and worldwide and is based in Johannesburg. It’s fleet consists of 47 aircraft, mostly Airbus A320-200, Airbus A319-100, Airbus A340-600 and Airbus A340-300. Up until 2006, it was mostly flying Boeing 737-200 before its fleet replacement program turned to Airbus’.
Is South African Airways bankrupt?
In short, yes. But it’s hard to say just how bankrupt it is. This is because, South African Airways refuses to present any financial results for the 2017/18 (doesn’t want investors to flee, perhaps). However, financial experts believe the airline’s debt has grown as large as R28 billion ($2 billion) while it only has about half that in assets. So technically yes, it’s bankrupt. But it does’t necessarily mean it has declared bankruptcy. And all signs point to the group not filing for protection. Instead, it hopes to secure a second bail out.
Will the South African Gov bail out South African Airways?
This is the big question. All the banks have already completely given up hope. And with other airlines such as Etihad (which used to love a bargain) steering well clear of making any offers – as if they could – it seems a bailout is South African’s only chance.
The airline already received over R19 billion in government bailouts last year, but this was given on the understanding that this would be enough to stabilise the airline group (which includes a budget airline). But as this hasn’t happened, it’s hard to imagine the SA government rushing in to give it more cash. Experts say, the airline will need another R22 billion in bailouts between now and 2021 if it is to survive – basically it needs a debt-wipe.
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But even so, this will come at a cost. In order to survive on this cash, it would need to sell off some businesses. Naturally, it’ll get the most money for the ones which are in the black – which it could do with holding on to. But right now, it just desperately needs the cash.
Many years of South African airways losses
However, this bad news shouldn’t be laid at the current CEO, Vuyani Jarana’s door. Many airlines are feeling the pinch right now. And he inherited a very messy situation from several previous mangers and acting CEOs (it’s been musical chairs for some time). During these reigns, South African Airways saw its fair share of controversy in terms of dodgy deals. And these cost the airline dearly.
In 2006 SAA paid a R45 million fine to the Competition Commission of South Africa for anti-competitive behavior, namely, attempting to prevent travel agents from dealing with rival air carriers. In 2007, it was fined another R55 million for price fixing. So let’s not be too hard on the current board – talk about flying on one engine.