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Home  >  South African Airways  >  Insanity: South African Airways Receives Huge Bailout
South African Airways

Insanity: South African Airways Receives Huge Bailout

Matthew Klint Posted onOctober 29, 2020October 29, 2020 11 Comments

During a time in which even once-healthy airlines around the world are fighting for survival, South Africa just injected a whole lot more cash into South African Airways. Is this simply doing the same thing over and over again while expecting a result, the definition of insanity? Or is it even worse considering the current perilous state of the airline industry in South Africa and around the world?

South African Airways Secures Bailout Even Though It is Not Operating

With COVID-19 still ravaging South Africa, air traffic is expected to remain depressed by at least 50% throughout 2021. But that hasn’t stopped South African Finance Minister Tito Mboweni from announcing another 10.5 billion rand (USD641 million) for South African Airways. The carrier remains grounded.

Although Mboweni has long resisted pouring more money into SAA, a company which has been unprofitable for over a decade, he announced the move on Wednesday. Public Enterprises Minister Pravin Gordhan, a longterm proponent of bailout, expressed optimism that South African Airways can be turned around.

This money is in addition to the 16.4 billion rand (USD1 billion) set aside in April to pay SAA’s debt and debt servicing. Why not bankruptcy? South Africa guaranteed the debt of SAA and cannot just write off its debt without larger economic ramifications.

South Africa sought private investment, but found none. Even Ethiopian Airlines, a Star Alliance partner who has eyed expansion in South Africa, declined to invest any money in SAA. It continues to eye an operational partnership, however, in rebuilding the airline.

Unsurprisingly, not everyone is happy about the news. In response to the new round of funding, the Organisation Undoing Tax Abuse (OUTA) has urged South Africans to boycott South African Airways. It calls the beleaguered airline a “vanity project” which “robs the poor” of vital resources, taking priority away from worthier institutions. OUTA CEO Wayne Duvenage noted:

“We’re extremely concerned about the allocation…to implement what we believe is an unworkable business rescue plan at SAA. We understand that debts need to be settled, but we cannot watch more precious tax revenue being wasted to revive a dying entity.”

Considering South African Airways no longer has a longhaul fleet or a large customer base, the move is curious…to put it charitably. Much of the funding will go to pay employee severance packages and issue customer refunds. There are no strings attached to the funding and no specific plan has been outlined for how SAA can return to growth.

 CONCLUSION

South African Airways remains grounded. Its greater structural problems remain unresolved. Yet the latest bailout has no strings attached. That’s going to end well…

image: Aero Icarus / Flickr

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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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11 Comments

  1. Ghostrider5408 Reply
    October 29, 2020 at 10:28 am

    Sad. I have flown SA intra Africa for years and always found flights to be enjoyable and frankly better snacks than on US metal! Other than Ethiopian African nations have had a hard go at it mostly due to corruption, Kenyan has really gone down at one time they were not bad long haul to Paris. SA needs that money for its people not a wasting money on an airline to no where

    • Bwgs Reply
      October 31, 2020 at 3:51 pm

      The government had backstopped bank lending to SAA and it’s the government’s responsibility to make the lenders whole. This gives the airline a “clean slate” to attract external investors. If none are forthcoming, I doubt the airline will fly again.

  2. Jason Reply
    October 29, 2020 at 10:31 am

    You write this: “Public Enterprises Minister Pravin Gordhan, a longterm proponent of bailout, expressed optimism that South African Airways can be trend around.”

    What does “Trend around” mean?

    Again, another case of sloppy / non existent editing undermining what is otherwise good reporting.

    • Will Reply
      October 29, 2020 at 11:40 am

      Why don’t you get that dildo out of your ass and maybe you’ll be able to concentrate long enough to know what “trend around” means.

      Are you telling me your so dumb you couldn’t even do ad libs? Lol .. you know fill in the blank for children. He got a word wrong and you don’t know what the sentence means?

      I know this will be hard for your simple brain to comprehend but … go fack yourself oosehool…. I’ll let you figure that out hahah

  3. albert Reply
    October 29, 2020 at 11:19 am

    @jason – Give him a break, It is a one-man blog, this isn’t as site where there is a professional editor reviewing every story before it is posted. I am not even sure how much that happens in “mainstream” online media these days.

    • AK Reply
      October 30, 2020 at 12:43 am

      Nope. Blogging is about writing. He’s not shy about interjecting non sequiturs from Saul Alinsky. He tries to shoehorn words like “probative” in a way that would make the most contrived sesquipedalian blush.

      Bring it on? No, it’s already brought. He can deal with the consequences of his writing, whether good or bad.

    • Paolo Reply
      October 30, 2020 at 6:30 am

      Agree. Many of the mainstream sites use voice recognition programs for their blog features, so there’s little, if any, actual writing, merely dictation. Most of the consequent ‘bloopers’ remain uncorrected/edited.
      I think Matthew does a great job given the limited resources. His intended meaning is always clear.

  4. Matthew Klint Reply
    October 29, 2020 at 12:13 pm

    I appreciate Jason’s corrections and think they are more constructive than some messages I receive. I try hard not to make mistakes, but I am indeed a working solo.

    • Charles McCain Reply
      October 29, 2020 at 12:31 pm

      Thank you for doing a fine job! I enjoy reading your articles and appreciate your input.
      Keep up the good work and ignore the buffoons that go off track. A testament of the times I guess.

    • derek Reply
      October 29, 2020 at 2:17 pm

      Solo? That could change in less than a decade when your little boy is able to harness his thrill for commercial aviation in the form of writing.

      • Matthew Klint Reply
        October 29, 2020 at 4:59 pm

        I sure hope so!

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