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Home  >  South African Airways  >  A New Bailout For South African Airways Only Delays The Inevitable
South African Airways

A New Bailout For South African Airways Only Delays The Inevitable

Matthew Klint Posted onNovember 7, 2018November 6, 2018 4 Comments

The sun rose in the east and South African Airways obtained another government bailout, this time for $343 million. When will this madness stop?

True, it’s not like the South African government had a lot of choice. It has guaranteed over $1BN in debt on behalf of the beleaguered carrier.

South African Finance Minister Tito Mboweni defended the move:

We will do this so as to protect the airline from its creditors calling in on its outstanding $1.11 billion, which is guaranteed by government.

And seeking to justify government involvement, he added:

So far we have saved $27.5 million from the procurement department alone. We are working hand in hand with the board to ensure their costs are down and their operational plans remain solid.

So flush another $343 million down the drain but boast about saving $27.5 million by making the product even less competitive?

The Real Problem

Just like Alitalia, the problem is not merely the bailout itself (propping up a company that has proven wholly unfit to stand on its own across decades), but the opportunity cost. By that I mean that every Rand spent on South African Airways is a Rand that could be spent elsewhere. We’re talking about the South African government, not Rich Uncle Pennybags. Healthcare, infrastructure, and education programs are sacrificed to bail out South African Airways. The consequence are real!

I wish South African Airways could survive and flourish. But I just don’t see it happening. Perhaps it is time for the South African government to end longhaul routes and focus on creating a viable domestic and regional airline that meets critical transportation needs. At least then the losses, like so many public transportation projects around the world, can be at least be justified based on necessity. But to continue longhaul prestige routes on inefficient, gas-guzzling planes just strikes me as counterproductive.

CONCLUSION

Another day, new life for South African Airways. But the day of reckoning is coming and it does not look pretty.

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About Author

Matthew Klint

Matthew is an avid traveler who calls Los Angeles home. Each year he travels more than 200,000 miles by air and has visited more than 135 countries. Working both in the aviation industry and as a travel consultant, Matthew has been featured in major media outlets around the world and uses his Live and Let's Fly blog to share the latest news in the airline industry, commentary on frequent flyer programs, and detailed reports of his worldwide travel.

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4 Comments

  1. Eric Reply
    November 7, 2018 at 9:37 am

    Who cares!? You’re not a South African taxpayer, so what business is it of yours? None. If the voters there don’t like the government’s decisions, they will make their feelings known at the ballot box.

  2. Justin Reply
    November 7, 2018 at 3:29 pm

    @Eric: Disagree with your premise that people are not allowed to have opinions on public policy in countries in which they are not taxpayers. In any case, the United States taxpayers give over half a billion dollars to South Africa every year (Source: USAID). If South Africa were better managed, it wouldn’t be in a position to be taking hundreds of millions of dollars of tax-payer cash from other countries every year. Bad policy is bad policy.

  3. Pingback: 10 Scary Facts Indicating South Africa Is Becoming The Next Venezuela • Just Conservative Views
  4. Pingback: 10 Scary Facts Indicating South Africa Is Becoming The Next Venezuela

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