The future of financially troubled South African Airways, including its freight division SAA Cargo, is at stake. Last week, the government failed to bail out the cash-stripped carrier that had entered into bankruptcy protection last December. Meanwhile, the crisis has deepened, going by the recent cancellation of numerous international and domestic flights.
Quo Vadis SAA? That is the most discussed question in African aviation these days. However, not even the Pretoria government seems to have an answer or any kind of masterplan to secure the survival of its national airline, let alone the carrier’s management. All President Ramaphosa’s administration says, is that they are in discussion with lenders and potential fund providers to rescue the ailing airline that operates an all-Airbus fleet of 45 passenger aircraft and a number of aging Boeing 737-300 freighters.
Unkept governmental promises
This seems to be a Herculean task, given the fact that SAA failed to pay off loans amounting to two billion rand (125 million euros) by a 19 January deadline. Currently, that amount is probably twice as high since Pretoria had committed to grant another two billion through the National Treasury to secure SAA’s staying in the air but failed to raise a single cent.
In view of the ongoing agony with no rescue plan at hand, aviation experts doubt that SAA has a realistic chance of survival, even if the company should manage to escape creditor protection. There are several reasons for this pessimistic assumption.
Firstly, there is the unfavorable geographical location of the country at the southern tip of Africa. This very much limits the role of Johannesburg in becoming an intercontinental hub for passenger and cargo traffic. Secondly, in addition to this, there is enormous competition from intercontinental airlines such as Emirates, Qatar, Turkish, British Airways, Lufthansa, etc. in both Johannesburg and Cape Town, all offering ample transport capacity and attractive products. These players, which include Addis Ababa-based Ethiopian Airlines, now Africa’s largest carrier, siphon away a lot of passenger and freight traffic, feeding travelers and shipments into their own gateways and global networks.
Will Pretoria step in?
Thirdly, there are meanwhile a number of local budget airlines such as FastJet, FlySafair, or Comair, which have a much more favorable cost structure, and operate extremely agilely compared to the rather sluggish and overstaffed SAA. It can be expected that these players will further fuel the price war and expand their market shares gained at the expense of penniless SAA.
All in all, these are strong arguments against the continued existence of SAA. At the end of the day, it depends on the government whether Pretoria is willing to take action again and channel additional billions into the ailing national airline as repeatedly done in the past, to save it from biting the dust.
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