SAA has been technically bankrupt for years. It hasn’t made a profit since 2011 and has been unable to publish its financial results to the SA parliament as a ‘going concern’. It’s been relying on government grants and the accumulated debt is in excess of ZAR13 billion. (£550 million)
The cause of the malaise is generally agreed to have been the action (or inaction) of a series of governments, most notably under Jacob Zuma which placed a series of incompetents in senior positions and within the board.
Back in December last year, we reported on South African Airways (‘SAA’) being put into ‘business rescue’—a form of protection against creditors. The guiding principle for the business rescue practitioners is firstly saving the company, and if not, to preserve as much value as possible for the creditors. Going into business rescue is an admission that the management and executives do not have the wherewithal to turn the organisation around and as such removes control from management and shareholders who in this case are the South African government.
The new administration did its best by cutting unprofitable routes, trying to sell inefficient aircraft and trimming costs wherever possible.
Then came COVID-19.
On April 14th the business rescue team requested an additional ZAR10 billion grant to buy more time, but the SA government understandably refused, given the strain on the fiscus as a result of COVID-19. As a consequence of that, the rescue team has advised that it will be obliged to dismiss the entire employee complement of over 4 700 at the end of this month. The dismissal terms are a month’s pay for each year served, a month’s notice pay and a pro-rata amount for unused leave. These amounts will be paid from proceeds of an asset sale, such as they are, but probably including SAA’s two lucrative night-time slots at London Heathrow. In a bizarre turn of events, the government has criticised this action and refused to contemplate the dismissals.
For an airline that first began operations in 1934, it’s sad to imagine that there might only be a few days left for South African Airways, but the country should be well served internationally by foreign operators and has a strong domestic and regional service.
After all, across the world there are more urgent matters at the moment and nowhere more so than Africa.