May Day, May Day, SAA: As other state-owned stumblers see light, answers for South African Airways are hard to find

Finally, the future of Alitalia might be secured. Air India’s possible privatization gives it the chance of a lifetime to become more than just a drain on taxpayers. A new government with more open aviation policies might finally lift the fortunes of Aerolineas Argentinas. LOT Polish has never had a more viable cost base. Ditto for Malaysia Airlines. Thai Airways too is taking big steps toward reform. There’s never been a more hopeful time for battered old state-controlled basket-case airlines.

Unless that is, you’re South African Airways.

Deep in southern Africa, some of the same forces lifting all airlines—foremost among them low fuel prices—are indeed helping embattled SAA. But this wasn’t enough to avoid the need for yet more government assistance, most recently to repay a loan from the U.K.’s Standard Chartered Bank. SAA ended the first half of 2017 with $1.5b worth of government loan guarantees, without which SAA would have virtually no access to the capital it needs just to stay in the air.

The airline did manage to reduce losses in its fiscal year that ended in March 2016, spilling only about $100m in red ink, compared to roughly $500m the year prior. But in its most recent fiscal year that ended in March 2017, the trend worsened again, as losses jumped to some $150m. Thereafter, according to Business Day, SAA lost almost $60m just in the first month of the new fiscal year, i.e., April 2017.

What’s wrong with SAA? Its list of problems is long. For starters, Johannesburg is terribly positioned for connecting traffic, unlike hubs further north like Nairobi and especially Addis Ababa. Similar geographic challenges, of course, haven’t stopped Qantas and even stateowned Air New Zealand from thriving. But they enjoy many advantages SAA lacks, including wealthier home economies and a surge in inbound tourism, most notably from China—Australasia is helpfully part of the booming Pacific Rim. Southern Africa is not. LATAM is the other large carrier cursed with poor geography at its original hub Santiago. But its path to success involved expansion through joint ventures across South America. SAA has some history of trying to replicate that strategy, such as in 2002, when it bought a stake in Air Tanzania. The experiment ended badly, however, not least because Tanzania and broader positioned for connecting traffic, unlike hubs further north like Nairobi and especially Addis Ababa. Similar geographic challenges, of course, haven’t stopped Qantas and even stateowned Air New Zealand from thriving. But they enjoy many advantages SAA lacks, including wealthier home economies and a surge in inbound tourism, most notably from China—Australasia is helpfully part of the booming Pacific Rim. Southern Africa is not. LATAM is the other large carrier cursed with poor geography at its original hub Santiago. But its path to success involved expansion through joint ventures across South America. SAA has some history of trying to replicate that strategy, such as in 2002, when it bought a stake in Air Tanzania. The experiment ended badly, however, not least because Tanzania and broader…

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