October 4, 2020//-Pressure is building on South Africa’s government to liquidate the state-run airline South African Airways (SAA) after administrators suspended the carrier’s operations on Tuesday.
With public spending severely overstretched even before the global pandemic, opposition and civil society groups say the airline, which hasn’t turned a profit for almost ten years, is ‘unsalvageable’.
“We don’t believe the airline in its current form is salvageable. We should stop throwing good money at it now and liquidate it,” South African businessman and civil society activist Wayne Duvenage said.
Duvenage believes the government should scrap the airline and relaunch a new South Africa-based international carrier in its place, where the government only hold a 25% stake.
“The problem with the current model is that nobody wants to buy into a defunct airline, with all the nooses around its neck.
“It’s best now in the Covid 19 situation to launch anew and we believe this will take up some of the jobs that are released. Civil society is saying we’ve had enough of taxpayer money being thrown into an empty hole.”
The government has asked creditors for a week-long grace period as it scrambles to put urgently needed funding in place for its $596m (10bn rand) restructuring plan, drawing fire from critics over where the cash will come from.
South Africa’s opposition Democratic Alliance party said on Twitter:
“With R57bn spent on bailing out SAA, the ANC now wants to use Covid-19 relief funding to save the failed SOE. Parliament and the public must reject this, we call for urgent special public hearings to interrogate the reported proposal, SA must decide!”
From Tuesday the airline will only be honouring pre-existing charter contracts for repatriation flights, while its assets are put under “care and maintenance”.
“What it means is that all of the aircraft and all of the systems at SAA need to be put into ‘preservation mode’ where they will be put in safekeeping until the resumption of operations, whenever that may be,” aviation consultant Linden Birns told a local radio talk show on Wednesday.
This isn’t just a case of “putting a dust cover over an engine and locking the plane,” Birns explains, but a matter of costly maintenance to keep aircraft intact and personnel training up-to-date, he told 702 radio’s “Midday Report.”
Tough road ahead
The insolvent airline went into administration in December, grounding all commercial flights three months later. The country’s National Treasury promised “to mobilise” more than 10bn rand ($611m) needed to help restart flights in July.
With so much political capital invested in the rescue, the government will not allow it to fail, Birns said.
But with the airline sitting on 3bn rand in unflown tickets that will have to be refunded or honoured, it will have a tough time convincing creditors or travellers to do business with them in future, says Birns.
“A lot of business suppliers who have worked with SAA in the past have been stung really badly by this business rescue. They’re only going to get 7.5 cents for every rand that they are owed.
“The airline can forget about getting discounts or extended terms of credit from a lot of the people it traditionally turns to for doing business with.”
https://africanbusinessmagazine.com/sectors/transport/pressure-grows-on-south-africa-to-dissolve-state-airline/
