South African Airways (SAA) will survive…at least for now…thanks to another government infusion. But will the government finally force the carrier to change?
Let’s zoom right into the text of statement from South Africa’s Department of Public Enterprises, as shared by Flight Global:
“SAA therefore, cannot continue in its current form…The airline group will now go through a radical restructuring process which will ensure its financial and operational sustainability. There is no other way forward…We are committed to a viable, sustainable, profitable national airline. It is our collective responsibility as South Africans to support SAA in its efforts to restore sales confidence among its customer base and rebuild revenues in the shortest possible time.”
A lot to unpack, but I’d summarize it in this way:
- South Africa is unwilling to let its flag carrier fail.
- South Africa views its roll to inspire public confidence in SAA.
- Thus, South Africa will continue to offer a financial lifeline to SAA.
- SAA will now enter a “radical restructuring process” targeting sustainability and profitability.
- No details have been provided on how it will accomplish that or what this process will entail.
The last point is key. It’s not a surprise that South Africa considers is flag carrier a national asset worth protecting. It is not even surprising (or even necessarily “wrong”) that it is willing to run the carrier at a loss. After all, the economic ripple effect of SAA is momentous. Even if that money could be better used for other purposes, keeping South Africa open to the outside world is at least a reasonable policy goal.
But the big problem is what to do now. Ok, so SAA gets another bailout. What now? Unions just fought for a pay raise…and won. What will happen when they are told they’ll need to take a large paycut as part of the “restructure”? Will people start buying tickets on SAA? Will insurers start insuring SAA flights again?
Because thus far, we’ve only been promised “bold initiatives” that will increase market share for SAA. That, tragically, sounds like more of the same.
South African Airways lives to see another day. But, what happens next is the bigger question. What can the government realistically do, noting that it is virtually impossible to cut your way to growth? With competition fierce, what can the government actually cut?
Looks like my spring trip to South Africa is safe…for now.