SAA 2.0. Really? What insanity has infected the ruling party government?
We are in the grip of a pandemic that has literally brought the world to its knees.
Millions have been infected, thousands have died. Millions more will be infected, thousands more will die.
The global economy is shrinking at a frightening rate, oil futures went negative for the first time ever recently, and with the exception of cargo aircraft and a small number of essential passenger flights, the world’s airlines are grounded.
Tourism as we know it, that wonderful past time largely reserved for the 1%, is in a state of collapse, with no indication whether it will recover, or, if it does, what shape or form it is likely to take in the future.
Millions of South Africans are faced with a sliding scale of calamities because of the pandemic-induced lockdown, with no end in sight: salary cuts, enforced paid or unpaid leave, retrenchment, and starvation, the latter arguably being the single greatest impact.
The R500-billion relief package recently announced – which became R800-billion when Finance Minister Tito Mboweni waved his magic wand the other day – seems to be having little effect when it comes to relieving the real hardship that we see unfolding in the overwhelming majority of communities nationwide. The images of starving people fighting to get their hands on food parcels, and the heart-breaking pleas that are flooding social media calling on government to help, are stark testament to the inadequacy of government’s response to the need to feed people who, because of lockdown, cannot work in order to earn enough to feed themselves and their families.
It has fallen to civil society organisations, and in some instances, local government, to step up and feed the hungry, but it is too little, too late, if the images of starving crowds are anything to go by.
And it is against this backdrop, that SAA 2.0, a new state-owned airline, is expected to rise, phoenix-like, from the ashes of South African Airways (SAA), the national carrier that has been on taxpayer funded life support for the last quarter century, to the tune of R57 billion.
SAA went into voluntary business rescue in December last year, but despite the best efforts of the business rescue practitioners (BRP), it became evident in mid-April that the airline was doomed when government rejected a plea for a further R10-billion bailout to continue funding the business rescue process.
The BRPs submitted an offer of severance to all staff, after which the business would have been wound down, but instead of accepting the inevitable, Public Enterprises Minister Pravin Gordhan, expressing the views of the executive no doubt, announced what amounts to SAA 2.0, a “national asset which is internationally competitive, viable, sustainable and profitable,” according to Mr Gordhan.
There has been much mud slung at the BRPs by the Department of Public Enterprises and the unions, accusing them of not coming up with a “solid plan”, and by solid, it is safe to assume that would mean a plan which would see the airline miraculously surviving and all 9 800 staff retaining their jobs.
“We are aware there is a great interest in the market on partnering with SAA. We would have expected that these interests would have been assessed by the BRPs and with government advised accordingly,” said Kgathatso Tlhakudi, acting director-general in the Public Enterprises Department, in the statement, in which he castigated the BRPs. Really? A great interest in the market on (sic) partnering with SAA? In which alternative universe do you live, Mr Tlhakudi, because it sure as hell ain’t the one in which the rest of us live.
By March 24, the International Air Transport Association had estimated that the airline global industry faced a revenue loss of $252 billion, a 44% drop against the previous year, and according to consultancy CAPA Centre for Aviation, most airlines would be bankrupted by the end of May 2020, unless governments stepped in to help out.
By way of example, and in case you didn’t know it, Mr Tlhakudi, Sir Richard Branson, oh he of Virgin Atlantic, one of the few previously profitable airlines around, has asked the British government for a £500 million bailout, and there doesn’t appear to be much chance of him getting it.
So, pray tell, Mr Tlhakudi, which magic lamp are you going to rub to incarnate the equity partner that is going to inject the capital needed to create SAA 2.0?
And what of the existing debt of SAA 1.0? And the leases for most of the 45 aircraft in the fleet which cannot be terminated without penalty? Or are these to be “transferred” to SAA 2.0? Along with all of the 9 800 employees?
“The leadership recognises the enormity of the challenge but are unequivocally committed to saving SAA and shining the torch to a new world post Covid-19 in which SAA is a key catalyst for investment and job creation,” says Mr Gordhan.
How on earth do you expect any self-respecting potential equity partner who might be foolish enough to consider investing in a new airline in the midst of a global airline industry meltdown, to not see through such transparent sleight of hand?
Well, here’s a thought. If you’re so hell-bent on saving SAA, why don’t you ask the unions to stump up the cash out of their pension fund? That way, you’ll be able to raise the cash you need without expecting government to divert much-needed money from fighting the pandemic, or pursuing this ridiculous flight of fancy, finding a willing equity partner.
But whatever you choose to do, just remember what happened to Icarus.