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SAA continues to nosedive while Gordhan delays take-off of long-awaited Takatso deal

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Guy Leitch is editor of SA Flyer and FlightCom magazines.

Despite promises that SAA Version 2 would require no more bailouts, Public Enterprises Minister Pravin Gordhan has been granted an extra R1-billion for the ailing airline, while the completion of the Takatso Consortium deal seems further away than ever.

Much was hoped for from SAA Version 2. The government made promises about no more bailouts, including no further guarantees for debt and aircraft leases. Yet Minister Pravin Gordhan has now been given a further R1-billion for SAA – for “business rescue purposes.”

The magic cure for SAA was supposed to be the sale of a majority shareholding to the Takatso Consortium. It was claimed this would provide the capital and skills to run the airline without yet more taxpayer money. 

There are also unanswered questions about where Takatso will get the promised R3-billion from – and even whether it promised the funds at all.

It appears increasingly unlikely that the Takatso deal will ever happen. In June it will be three years since the deal was announced and the government keeps kicking the can down the road. Now, as his latest delaying tactic, Gordhan has withdrawn the new SAA Bill from Parliament. 

Only once the SAA Act is replaced, will the government start the time-consuming process of applying for amended operating licences. If the government was genuinely committed to selling off the airline, these steps would have been completed years ago – while it was grinding through the Competition Commission and Tribunal.

So yet again the Takatso deal is stalled, and the airline continues to operate with a shortage of both skills and capital, as it has done for the past 25 years.

From 2001 to 2010, SAA averaged a loss of roughly R1-billion a year on a R25-billion turnover. While the critics moaned, this loss was claimed to be justifiable because of the broader benefits SAA brought to the South African economy. Then, under Dudu Myeni, this loss swelled to an unsustainable R6-billion a year.

No option but to grin and bear it

To justify its support for a business it has no reason to be in, the government likes to remind us of the importance of SAA to South Africa’s economy. Gordhan pointed out that it is essential for skills development, and to keep as much of the money spent on air travel in South Africa as possible. With no viable political opposition, taxpayers had no choice but to grin and bear these delusions.

Continuing the same rationale, under business rescue, R26-billion was provided to recapitalise the airline – to fill the massive debt hole created by looting, preferential procurement and cadre deployment. Creditors were forced to take vicious haircuts so that the interest burden of the legacy debt could be wiped out. Losses of R50-billion were quietly erased so that the new SAA V2 could be presented debt-free, as an unencumbered bride, to the Takatso Consortium.

Under the business rescue process, the airline’s headcount was slashed from 5,000 to just 1,000. The new streamlined company made taxpayers happy by claiming that it had made a profit and was running cash positive. 

But it was a short-lived honeymoon. For 2022 the airline produced a R122-million loss – and that was on a paltry R3.6-billion revenue, just 14% of pre-Covid levels. 

By 2023 the world’s airline industry had recovered to 95% of its pre-Covid levels, yet SAA remained the dunce of the class – and an embarrassment to all South Africans, apart from the tone-deaf government. 

For the 2023 financial year, the SAA Group loss had swollen to R761-million, which was not as bad as it might have been without the quiet stars of the show; SAA Technical and Air Chefs, which both made positive contributions. 

In 2024 the airline has reported a loss of R776-million for just nine months, and thus extrapolating, a probable loss of R1-billion for the year.

The airline’s key problem is that revenue for 2023 was 26% less than budget, mainly because it cannot get the planes it needs to open up its old routes – or even try to compete on new routes. It has also admitted that it cannot attract the right calibre of staff. The best of its Flight Operations staffers have long since found employment in airlines as diverse as RwandAir, and as far afield as Fiji, where former SAA CEO Andre Viljoen successfully runs an airline considerably bigger and better than SAA V2. 

A particular irony is that one of the spin-offs from the business rescue process was that the airline was supposed to finally be able to transform its pilot body from being 80% white male to mostly non-white. Yet a disproportionately large number of the non-white pilots left the airline for greener, or sandier, shores. 

The government is leading taxpayers down the garden path. From its continual delaying, it can only be concluded that it has little or no intention of completing the Takatso deal. And so SAA will continue to struggle along, with obsolete aircraft and unable to attract quality management. The losses will continue. Pravin’s promises of no more bailouts are already being revealed to be meaningless. DM

  • Story corrected to reflect that it was Air Chefs not Mango which made a positive contribution to SAA’s 2022 results.
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  • Robert Pegg says:

    Today I have to pay over R90,000 Provisional Tax to SARS, while waiting over a year for a VAT refund of R1 million.
    This is just another example of how badly SOE’s are managed.
    Please let’s get rid of these old has-been “freedom fighters” in government and replace them with younger qualified people no matter which political party they vote for.

    • shannon Maxwell says:

      It is positively criminal, withholding a vat refund, and in many cases refunds due on tax returns, because SARS falls into the “limping along” description of yet another inept SOE. Love your last paragraph about old has-been “freedom fighters”. I have just paid capital gains to SARS on sale of a small property and every rand I paid them was the biggest grudge payment ever, knowing that it would more likely than not, go towards another broken scheme of the government.

  • Don Andrews says:

    You should have expanded on the skills development bit…how does that work when Turkish aircraft and crews are used to fly scheduled services in SA

  • Sydney Kaye says:

    They just don’t get that people who can make it through their own endevours aren’t interested in ANC quaint ideas on transformation. Of course skilled pilots (white or non white) will run a mile from SAA if they have the opportunity.

  • William Dryden says:

    Gordhan should have been fired long ago, he is behind every SOE that has collapsed, and he defies parliament in not handing over the Takatso contract.

  • Tim Price says:

    Just reaffirmed my commitment to boycott SAA until it finally runs out of steam. Thanks to Pravin, it just keeps on going.

  • Beyond Fedup says:

    Gordhan, Patel, Mantashe, Nxesi, Nzimande etc. All useless old communist failures who have no place in government as their creed has proven a failure everywhere in the world where it was introduced, leading to misery, poverty and a wasteland. Why these incompetent parasites are still around is directly linked to the sorry state of our country. In fact, if SA has any chance of moving forward and prospering, get rid of the useless, criminal, parasitic and corrupt anc.

  • D'Esprit Dan says:

    Gordhan needs to be fired, ASAP, and charged with dereliction of duty at a bare minimum. It’s disgusting that this process has not only been dragged on for years, at taxpayer expense, but that as taxpayers we’re being told to f-off as it’s none of our business! Yet another reason to kick this sleazy mob into touch!

  • andrew farrer says:

    Let the DA appoint a new board & senior management, and watch it take off

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