South African Airways on the verge of collapse
South African Airways on the verge of collapse. The airline has been facing financial problems for quite a number of years and the presence of the coronavirus has caused what seems to be like unrepairable damage to the survival of the airline.
The 86 year old airline is the national carrier of South Africa. The airline serves 22 domestic destinations and 38 international destinations in 23 countries. The airline operates an all Airbus fleet of A320,A330,A340 and A350.
Mounting financial issues
South African Airways is on the brink of collapse. The airline plans to lay off its entire workforce of 4,700 staff. The 86 year old airline has been battling financial issues and had been surviving on bailouts and funds provided by the government.
SAA employees
The airline was initially planning on reducing its routes and considering job cuts before the pandemic forced the airline to suspend routes and ground its aircraft.
The state-owned airline has offered severance deals to all 4,700 staff from the end of this month after administrators concluded that a successful turnaround is now unlikely, according to a proposal to eight labor groups seen by Bloomberg News.
Bankruptcy protection and fight for survival
The largest airline in South Africa last made profits in 2011 and was put in bankruptcy protection in the December of 2019. The South African government has said in a statement that before placing the airline under business protection, it had told the management and board to investigate and terminate irregular contracts.
The airline has accumulated over a loss of R28 billion. Virgin Australia is another airline which has gone into voluntary administration. South African Airways has been operating cargo and repatriation flights to Brazil, USA since suspending commercial services in the country.
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What next for SAA ?
The airline was placed under bankruptcy protection last December. With mounting debts, the government has decided to go against funding the airline. The airline will now look to sell its assets in a bid to raise cash to pay its creditors.
The airline owns some of its aircraft along with being the proprietor of SA Technical and also owns the low cost airline Mango. Most of aircraft the airline uses are leased. The airline had recently acquired A350 aircraft to replace its A340 fleet. It plan to sell its aircraft in the current scenario seems a challenge as with travel bans and restrictions, finding a buyer will be difficult.
Even if it manages to raise money by selling its assets, experts feel this would not be enough to save the airline. The government can look to restart another airline, a whole different entity with foreign investors including airlines with a small network to start with.
South African Airways is the only long-haul carrier present in the country. If the airline ceases operation the aviation industry in the country will be affected with ripple effects seen in the travel and tourism sector as South Africa has no other airline to provide long haul service.
This could also mean opportunities for the carriers such as Ethiopian Airlines or Gulf giants such as Emirates, Qatar or Etihad to increase dominance in the South African market which had been dominated by SAA.
Conclusion
South African Airways could be on the verge of a collapse with the way things are going. The airline has been mounting debts over the past few years which have been leading to this crisis and without addition funding the course of the airline seems challenging.
Will we see SAA fly again or will it cease operation or will we see another airline form out of this ? This question can only be answered with time.