South African Airways (SA, Johannesburg O.R. Tambo) has been forced to cancel select flights between Johannesburg O.R. Tambo, Cape Town International, and Durban King Shaka locally and to Munich internationally over the period January 20 to 24 as the government scrambles to find ways to inject ZAR2 billion rand (USD137 million) in funding into the embattled national carrier.
“These decisions are in line with SAA’s usual policy of reviewing flights and consolidating services with low demand. Furthermore, during the current process of Business Rescue, these cancellations represent a responsible strategy to conserve cash and optimise the airline’s position ahead of any further capital investment,” spokesman Tlali Tlali said.
The state-owned airline has been under bankruptcy protection since lenders agreed in December to provide ZAR2 billion to allow it to keep operating. President Cyril Ramaphosa’s government assented to provide an equal amount, but this has yet to be paid.
The country's Department of Public Enterprises released a statement on January 19 saying it was “engaging with the National Treasury to raise funds” for the airline.
The government's aims, it said, include creating “a sustainable, competitive and efficient airline with a strategic equity partner”, a “break with the past pattern of bailouts as these have become a moral hazard”, and minimising job losses.
SAA last made a profit in 2011 and has received ZAR57 billion (USD3.9 billion) in bailouts since 1994. Under Ramaphosa, the National Treasury has been reluctant to provide further funding. The carrier has already used up a loan it received from banks last month, sources familiar with the matter told Bloomberg.
The airline is one of several South African state companies, including the electricity public utility Eskom, that are enmeshed in financial crisis after a decade of mismanagement. According to Reuters, the financial problems of state entities are seen as the single greatest threat to South Africa’s economy and have been the main reason for the downgrading of the country’s credit rating to junk status or one notch above it since 2017.
