Opinionista Justin McCarthy 8 October 2012

South Africa’s Anguish – why I won’t fly SAA

I don’t labour under the misconception that by not flying SAA, I’ll make any difference to them – they can, after all, just ask for another bailout. But maybe if we all support independent airlines, they’ll eventually grow enough to provide some real competition.

There’s an old joke that bears repeating here as an introduction. A guy is sitting in the bar in departures at a busy airport. A beautiful woman walks in and sits down at the table next to him. He figures that she’s probably an off-duty flight attendant and decides to have a go at impressing her by identifying the airline she works for. He leans across and repeats the Delta Airlines motto, “We love to fly and it shows.” The woman looks at him blankly. He leans forward again and delivers the Air France motto, “Winning the hearts of the world.”  She just glares at him. Undeterred, he tries again, this time repeating the Malaysian Airlines motto, “Going beyond expectations.” The woman looks at him and barks, “What the hell do you want?” 

“Ah!” he exclaims, “South African Airways.”

SAA has a bad reputation for a number of reasons, but bad attitude is not the reason I won’t fly them. National airlines, once the bearers of a nation and symbols of national pride, have had their wings clipped over the past two decades as a result of deregulation, increased competition and privatisation. British Airways was privatised in 1987, while Lufthansa was fully privatised a decade later. Air France-KLM was realised in 2004, following the merger of the two airlines, with the French government’s share being reduced from 54% to 18,6% today. Qantas was privatised in 1993, and Kenya Airways is a profitable public private partnership with the government holding 29,8% of the equity.

There remain only a few markets where the government owns and operates the national airline. Sadly, South Africa is one of those, the result of globally discredited economic centralisation policies. Interestingly, but not surprisingly, China is the exception. But then, many things about the Chinese economy are exceptional. Between 2004 and 2010, passenger numbers almost doubled to 500 million. In that time the government built 30 new airports, and it has plans for 100 more by 2020. The three state-owned airlines, Air China, China Eastern and China Southern, are in steep ascent while their private rivals are crash landing. Only 4 of the 14 private carriers established since 2004 were still flying in 2010 (Time Magazine, October 2010). 

Sound familiar? It does to the SA airline industry. Since deregulation in 2002, nine of the eleven private airlines competing against SAA have failed. That’s an 81% failure rate, worse than the Chinese rate of 71%. SAA was found guilty of price fixing by the Competition Commission, and is being sued by Comair and Nationwide for damages related to abuse of its dominant market position. The history of successive SAA leadership reads like Bafana Bafana’s coaching line-up – one ringmaster and a bunch of clowns. Coleman Andrews, an American “airline turnaround specialist”, pocketed R220m of taxpayers’ money in return for incurring R1 billion in losses over twenty short months. He infamously stated “We need to develop an airline which customers love and competitors fear,” and promptly produced the opposite. 

He was followed by his deputy, Andre Viljoen, perhaps the most competent manager the airline has ever seen, but who was incapable of making a profound impact due to shareholder constraints. Then we were blessed with the derisory, Khaya Ngqula whom the board fired, and from whom they are still seeking damages over tender irregularities. 

We presently have Siza Mzimela, who was transferred from that other state enterprise, SA Express, where she left a royal mess with the organisation carrying a qualified audit and unable to present its latest financial statements. It’s laughable that IATA (the airline industry’s representative body) waxes lyrically about her when it says, “SA Express registered substantial growth under her leadership, culminating in the eradication of its  technical insolvency status – an accomplishment made all the more remarkable given that it did not require recapitalisation to attain this financial milestone.” 

SAX operates many routes with no competition whatsoever, allowing it to set its own pricing and determine its own schedules to suite its fleet and asset utilisation. On the approximately 40% of its routes where it does encounter competition, half of this is in the form of other national carriers, hardly known for their competitiveness. It competes with Air Namibia on four routes, with Air Botswana on one, Korongo Airlines on one and Comair on four. Thus it competes with private airlines on five out of 23 routes, which isn’t exactly a test of commercial character. Book a flight on any of the minor routes of the same flight distance and duration as any of the major routes (on which there is reasonable competition) and you’ll find a great difference in price – between 40% and 100% in some instances. It’s not exactly a free market, is it?

I fly a lot. I’ve been a frequent flyer for over 15 years – internationally, regionally and domestically. I’ve flown over 200 times since the beginning of 2011 alone. Not one of those was on SAA. (Unfortunately I cannot say the same for SA Express, as I have no choice on certain routes.) In fact I have refused to fly SAA for over ten years now, and I will continue my boycott of principle for as long as the airline enjoys protection from the vagaries of free market forces. Naturally my futile little protest means absolutely nothing to SAA, but it provides me with a little smattering of the feel-good factor in knowing that I’m not supporting the monster and its tribe of leeches.

SAA has been “restructured” more times than Helen Zille’s had botox, but at least Mrs Zille pays her own way. SAA doesn’t. Its most recent and successful application to government for a R5-billion loan takes its total bailout package to R16,8 billion in 20 years. Trevor Manuel must be jumping like spit on a hot stove. It was he, as Finance Minister in 2009, who approved a R1,5-billion guarantee with the caveat that “this will not be a recurring allocation”. His DG at the time, Lesetja Kganyago, referred to SAA and other public institutions as “unreformed alcoholics”. How refreshing that was compared to the mutterings from public enterprises minister, Malusi Gigaba, that the latest guarantee is conditional on SAA’s management developing a turnaround strategy. Please, Mr Minister, how is this different from all the other bailouts? How do you condone the appointment of Ms Menzi, with her track record seriously compromised by financial irregularities at SA Express? 

I refuse to fly SAA because in doing so, I pay twice for my ticket. Since, as a taxpayer, I have contributed to the average bailout of R830 million per year for twenty years, I am not going to pay a second time for the ignominy of flying on the airline, flag-bearing brand-new fleet or not. I will support the carriers bound by the restrictions of free market enterprise, because they are the ones that deserve my custom for running honest businesses and surviving despite the major disadvantages they face against anti-competitive behaviour and repeated taxpayer bailouts. 

Sadly, it’s wishful thinking that if thousands of others followed the same logic, we would make a difference to SAA. We won’t. Not even the corporate customers who make up a hefty chunk of all airlines’ profitability could really make a difference, because it would only mean that the airline would require bigger bailouts on the back of declining volumes. However, it will make a big difference to the remaining private carriers and even introduce the possibility of a return to the skies of 1Time and others. And let’s face it, without them, we’ll be back to bad service and inflated prices – before we’ve had the chance to retell the air hostess joke. DM

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