Delta talks a good game about the evils of government subsides. But you have to wonder, then, why a blatant case of a government propping up a failing carrier on a route Delta competes on doesn’t even merit mention.
South African Airways is the beleaguered state-run carrier of South Africa. It perennially loses money, to the tune of $1.5MN/day. But like Alitalia, it is propped up by the government for reasons of national pride and because of the ripple effect of jobs in a fragile economy. The South African government has once again bailed out South African Airways. This isn’t the first time and it probably won’t be the last time either. The$176MN loan will only tide over SAA for a few months.
While the intrigue between South African’s failed leadership and the failed ANC ruling party is an interesting discussion, let’s focus on Delta here.
Think about it. Delta flies to JNB, South African flies to JNB. South African only exists because it is propped up by the national government. Per Delta’s logic, doesn’t that put American jobs at risk? Doesn’t that a constitute a gross crime against humanity because were demand to sufficient, no subsidies would be needed?
I can anticipate the response: South African Airways is a small player. Unlike the Gulf Carriers, its weak financial state reveals it is not really a threat. Furthermore, its problem is not excess capacity to drive out competition but simply horrible mismanagement.
But I hope you can see the disconnect in that logic. One of Delta’s primary arguments is that if the U.S. government does not act, Delta will lose more routes and every route lost costs 150,000 American jobs (per Delta). South African is flooding the market with half-empty flights to New York and Washington, DC, placing pricing pressure on Delta’s Atlanta to Johannesburg route.
The inconvenient truth is that Delta doesn’t give a rip about subsidies. That’s why it partners with Aeroflot, Alitalia, China Eastern, and Saudia. That’s why we don’t hear a peep about South African Airways. But the Gulf Carriers offer a compelling product that is so attractive it becomes a “threat” to greedy Delta’s billions in profit. Another example of hypocrisy in the debate over subsidies.
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image: Aero Icarus / Wikimedia Commons