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