There are a number of airlines around the world that continue to flounder financially. Some have been in this state for years, losing millions, if not billions of dollars. In many cases, the government of their country continues to pour in funds to keep the airline alive.
Back in January I predicted that we might see the end of three national airlines this year. Among these was perennially-troubled Alitalia, flag carrier of Italy. What was not among them was South African Airways. And they may be in some serious trouble.
South Africa Refuses to Back SAA Any Longer
Even before the coronavirus pandemic, South African Airways was in bad shape. The airline has done nothing but lose money over the past several years, to the tune of $1.4 billion USD. The national government has stepped in to sustain the airline, even in its poor financial state. This isn’t uncommon with state-owned flag carriers.
However, with the current ongoing crisis, the South African government is now refusing to offer any further funding to the airline. SAA is being asked to seek funds from other available sources. The country’s finance minister cites letting the airline go under as a way to save funds for dealing with other aspects of the coronavirus crisis. He’d long been an advocate of abandoning SAA, so this is no surprise.
South African Airways has grounded all its flights due to the virus, so it is losing money even faster. If there was a time where the airline needs government intervention, it is now. Even U.S. carriers are asking for billions of dollars.
But…the airline is receiving exactly the opposite. Unless someone steps in, we will see the demise of SAA and likely it’s acquisition or liquidation. The latter is the more likely outcome.
Nations are often unwilling to let their flag carrier airlines go under completely. Alitalia has been a mainstay of Italy, even though the carrier loses millions of euros every week. But at some point it makes sense to cut losses and let other carriers step into the void if a carrier cannot be restructured into a profitable financial model.
Still, I’m always sad when airlines go under, especially a flag carrier. I actually have a mistake fare booked for early next year with friends with a segment on SAA, so I’ll be curious to see how this plays out.
H/T: Loyalty Lobby