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Position Report

September 19, 2016

For years I have tried to correct the popular perception that SAA is a disaster. Although the airline has averaged losses of R1 billion a year for the past ten or so years, I have tried to point out that under normal circumstances the airline operates profitably, but is dragged down by a legacy debt burden – a large part of which arose in 2004 when the airline lost R6 billion on a disastrous fuel and currency hedge that went badly wrong in the wake of the Rand’s recovery from the collapse of 2001. Sure, the airline has continued to lose money, but usually only through political meddling in having to operate unprofitable routes and the occasional bad year for the entire airline industry where high fuel prices coincide with reduced demand for travel.

But up until now the airline has been a beacon of excellence. In particular, we can be proud of a world class Flight Operations Department. SAA pilots are widely considered amongst the best in the world, and hence they have to be paid world class salaries if they are to stay with the airline. The airline has pioneered new standards of training, the latest is Upset Prevention and Recovery Training, led by SAA senior first officer Brad Bennetts.

All this makes flying for SAA the dream of, I daresay, almost every aspiring professional pilot. And yet the very existence of the airline is now under threat from the showdown between SA State President Zuma and Minister of Finance Pravin Gordhan. The threat by Hong Kong to cancel SAA landing rights, due to the non-submission of financial statements, may well be the first card to fall in what has become a house of cards. SAA has put out a plaintive, yet insouciant, appeal for a fresh R16 billion in loans and guarantees (the subject of our Quote of the Month). I am told that a large part of the current loans and guarantees are due in the next few months, and SAA hasn’t produced financials to prove otherwise.

If SAA doesn’t get new R16 billion guarantees, it will be forced to default. And if SAA defaults the aircraft lessors, who now own almost all SAA aircraft, will rush to call in their loans. The house of cards will collapse, and South Africa’s world class airline will have become just another African calamity. The biblical analogy of Sampson, having been corrupted by a women, pulling down the temple in his impotent fury, is apposite.

It is incomprehensible that the airline, with its 10,000 employees and world class legacy, should be a pawn in a battle against the venal capture of State enterprises by the president and his cronies. The enrichment of one family and its hangers-on cannot be allowed to destroy an institution as good and justifiably proud as SAA.

 

 

 

 

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