SAA turbulence: Restricted bailouts and Flight Centre cuts

While at first glance, the worst seems to be over for South African Airways (SAA), after striking workers reported back to work, however, the national carrier’s financial troubles continue to linger.

Workers down tools, demanding pay increases

On 29 November 2019, SAA announced it had paid the month’s outstanding salaries after staffers had only received half their pay – despite its dire finances. Workers affiliated to the National Union of Metalworkers (Numsa) and the South African Cabin Crew Association (Sacca) tools earlier that month, demanding an 8% salary hike.

They finally settled at an 5.9% increase – on total cost of employment retrospective to 1 April 2019, which will be paid in February 2020. The cost of the strike was estimated at R50 million per day.

The strike did anything but help the airline’s financial position. The public enterprises department said due to the strike, and subsequent cancellations, SAA’s finances went from bad to worse.

“Accordingly, the Department of Public Enterprises is working together with SAA to urgently formulate immediate actions that will be required to provide support to enable SAA to carry on its business”, it said in a statement.

‘No more bailouts’ – Pravin Gordhan

The department announced, in the wake of the strike, that there wouldn’t be anymore bailouts for the struggling airline – raising questions on how it will get out of its financial crisis.

“Over the last three years, the government has provided more than R20.5 billion of fiscal support to SAA. No further financial resources can be advanced to the carrier. The Government is facing severe fiscal constraints.

Even if there were funds available, there is no legal mechanism to provide funding to SAA in the current financial year. The funds that Government has committed to provide over the next three years have been earmarked for the repayment of SAA’s debt”, Gordhan said in a statement.

Flight Centre drops SAA

As if its troubles weren’t enough, travel group Flight Centre South Africa has announced severing all ties with SAA, at least for now, over concerns of its “long-term viability.” The move means further losses for the state-owned entity.

“In light of the above developments and continuing concerns regarding SAA, Flight Centre Travel Group South Africa has made a decision to no longer sell SAA, until such time as we have obtained certainty in the market”, the group said in a letter sent to clients.