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Is the iconic Springbok on the verge of death – SAA to face liquidation?

SAA

 

Things don’t look too rosy over at South African Airways. In fact, if rumors are to be believed, Africa’s second largest airline are on the verge on liquidation.

Years and years of mismanagement and government meddling have taken their toll and the airline has not been making timely payments to their creditors. Their chief auditor has just resigned and the airline is reluctant to release their most recent financials for fear of being blacklisted. All this adds up to a dismal outlook for the once burgeoning airline.
Per Airways magazine:

In the last several weeks, South African has missed or is in danger of missing several payments to creditors, including a 250 million rand ($18 million) loan that Standard Bank of South Africa has requested immediate repayment on.

 

Meanwhile, the company faces a September 6 deadline from Hong Kong’s registrar of companies, which has threatened to withdraw SAA’s right to serve its daily Hong Kong – Johannesburg route unless the airline submits financial statements the registrar.

Here’s the problem – if SAA were to actually submit their financials to the Hong Kong authorities, it’s most likely to portray them as a “nonviable business” and the airline will be forced to withdraw regardless – to end their last profitable Asian destination. To avoid this situation the airline has sought a 5 billion Rand (USD$350 million) emergency loan from the South African Treasury to cover their balance sheet, a move that has been rejected outright by Pravin Gordhan, the South African Finance Minister. He has expressed hesitancy to pump any new money into SAA until a new board and President has been installed – a reasonable condition.

On top of the corruption scandals that SAA has faced under the Zuma presidency, the airline continues to bleed money through loss making inter-continental routes. A latest internal report indicates that London Heathrow, Frankfurt, Washington DC, Hong Kong and Singapore are the only profitable long haul routes the airline operates. This means other long haul destinations such as Rio De Janeiro, Mumbai, Perth, Sydney, New York, Beijing, Paris, Buenos Aires and Rome are all loss makers and need to be culled if not completely cut – with the long haul Airbus aircraft used on these routes re-deployed to more lucrative intra-continental African routes such as Abuja, Accra, Luanda and Lagos.

The other problem is the fleet revitalization program – are SAA going to continue with Airbus and go the A350 route, or go the 787 way? Admittedly the airline operates under unique circumstances in that a majority of their flight operations are long haul and their home base is ‘hot and high’ – JNB is at 4,800 meters – so unique four engine ops are required. While this may be mitigated by new technology by way of the 350 or 787, a decision must be made soon to retire the current gas guzzling A340-600 fleet that does the European and American runs.

Is it likely to happen? That’s debatable given SAA’s traditional role as a political playing tool and a South African pawn for international recognition. Though this time round, especially under Zuma’s administration, SAA might be one bridge too far to get through this latest crisis.

Let’s hope for the best for the Springbok.

811x260_sa_crew

 

 

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