Billions and billions have been thrown at The South African Airways (SAA), but the airline don’t have much to show for it. It’s hard to recall a time when the limpest of all our state-owned entities was successful on its own two feet. It has a history of relying on fiscal interventions, needing contributions from both private firms and the taxpayer just to stay airborne. Over the last 20 years, their borrowing has been obscene, merely a few days ago the board has requested yet another additional R4 billion to stay afloat this financial year.
According to a SAA spokesperson the company requested the R4 billion bailout as it has been operating at a loss since 2011. The entity needs approximately R450 million a month to keep operations running. The airline’s generated revenue of R30.4bn in 2016-17, while operating costs amounted to R30.9bn. Finance costs totalled R835m and the operating loss was R533m. The losses have continued into the current year‚ with a R734m loss suffered in the first month of 2017-18 on revenue of R4.7bn. The airline‚ which is facing liquidity challenges‚ continues to rely on state guarantee to keep its operations in the air.
We’ve took a journey through their financial woes, and turfed up how much money has been thrown into a black hole. Warning: Some of the sums discussed are eyewatering.
How much money has been spent on SAA bailouts?
According to Africa Check, SAA had been spending R29 billion from 1999 until 2017 and the single biggest payment made to the company in that time was calculated at R6.5 billion. However, the financial troubles did not disappear and more taxpayers money was made available to keep the airline running. Rendering the annual report from both the South African Airways (SAA) 2015/2016 and the South African treasury 2016/2017 it identify a total of R19.1 billion of “government guarantees” made available to the airline to date. Furthermore, an extra R10 billion was allocated to the airline in 2017, which will take the total commitment to R29.1 billion.
Since that research was published, SAA have managed to scoop more “government guarantees” (a fancy term for “bailouts”) over a 16-month period. At the start of October 2017, they were the recipients of a R1.8 billion loan, but more was to come the year after. Despite Finance Minister Tito Mboweni’s objections to further SAA bailouts, they were given a R5 billion shot-in-the-arm back in October. Just three months later, the airline were back with more demands and landed a further R3.5 billion in funding awarded to them. However, that particular sum of money was secured from private lenders.
That’s an additional R10.3 billion that’s made it’s way into their bottomless pit of savings in less than a year-and-a-half. Add that to the total calculated in 2017, and it works out to be a lump sum of R39.3 billion.
If they default on their recently-acquired loan, the government – and yes, us taxpayers – will be liable to pay back the money. Given that SAA have previously stated they need a further R21 billion to turn things around, this surely will not be the last time they plead charity.
The once proud Springbok who prized on the South African Airways (SAA) tail, now seems to be a flimsy chicken struggling to take flight. Economist Mike Schussler says the only way out is for the government to intervene and advance money or for the airline to be closed. He also states that taxpayers can no longer afford SAA to bail out the struggling state entity.
Elizaan De Koker