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SAA continues to nosedive while Gordhan delays take-off of long-awaited Takatso deal

Guy Leitch
By Guy Leitch
28 Feb 2024
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Despite promises that SAA Version 2 would require no more bailouts, Public Enterprises Minister Pravin Gordhan has been granted an extra R1-billion for the ailing airline, while the completion of the Takatso Consortium deal seems further away than ever.

Much was hoped for from SAA Version 2. The government made promises about no more bailouts, including no further guarantees for debt and aircraft leases. Yet Minister Pravin Gordhan has now been given a further R1-billion for SAA – for “business rescue purposes.”

The magic cure for SAA was supposed to be the sale of a majority shareholding to the Takatso Consortium. It was claimed this would provide the capital and skills to run the airline without yet more taxpayer money. 

There are also unanswered questions about where Takatso will get the promised R3-billion from – and even whether it promised the funds at all.

It appears increasingly unlikely that the Takatso deal will ever happen. In June it will be three years since the deal was announced and the government keeps kicking the can down the road. Now, as his latest delaying tactic, Gordhan has withdrawn the new SAA Bill from Parliament. 

Only once the SAA Act is replaced, will the government start the time-consuming process of applying for amended operating licences. If the government was genuinely committed to selling off the airline, these steps would have been completed years ago – while it was grinding through the Competition Commission and Tribunal.

So yet again the Takatso deal is stalled, and the airline continues to operate with a shortage of both skills and capital, as it has done for the past 25 years.

From 2001 to 2010, SAA averaged a loss of roughly R1-billion a year on a R25-billion turnover. While the critics moaned, this loss was claimed to be justifiable because of the broader benefits SAA brought to the South African economy. Then, under Dudu Myeni, this loss swelled to an unsustainable R6-billion a year.

No option but to grin and bear it


To justify its support for a business it has no reason to be in, the government likes to remind us of the importance of SAA to South Africa’s economy. Gordhan pointed out that it is essential for skills development, and to keep as much of the money spent on air travel in South Africa as possible. With no viable political opposition, taxpayers had no choice but to grin and bear these delusions.

Continuing the same rationale, under business rescue, R26-billion was provided to recapitalise the airline – to fill the massive debt hole created by looting, preferential procurement and cadre deployment. Creditors were forced to take vicious haircuts so that the interest burden of the legacy debt could be wiped out. Losses of R50-billion were quietly erased so that the new SAA V2 could be presented debt-free, as an unencumbered bride, to the Takatso Consortium.

Under the business rescue process, the airline’s headcount was slashed from 5,000 to just 1,000. The new streamlined company made taxpayers happy by claiming that it had made a profit and was running cash positive. 

But it was a short-lived honeymoon. For 2022 the airline produced a R122-million loss – and that was on a paltry R3.6-billion revenue, just 14% of pre-Covid levels. 

By 2023 the world’s airline industry had recovered to 95% of its pre-Covid levels, yet SAA remained the dunce of the class – and an embarrassment to all South Africans, apart from the tone-deaf government. 

For the 2023 financial year, the SAA Group loss had swollen to R761-million, which was not as bad as it might have been without the quiet stars of the show; SAA Technical and Air Chefs, which both made positive contributions. 

In 2024 the airline has reported a loss of R776-million for just nine months, and thus extrapolating, a probable loss of R1-billion for the year.

The airline’s key problem is that revenue for 2023 was 26% less than budget, mainly because it cannot get the planes it needs to open up its old routes – or even try to compete on new routes. It has also admitted that it cannot attract the right calibre of staff. The best of its Flight Operations staffers have long since found employment in airlines as diverse as RwandAir, and as far afield as Fiji, where former SAA CEO Andre Viljoen successfully runs an airline considerably bigger and better than SAA V2. 

A particular irony is that one of the spin-offs from the business rescue process was that the airline was supposed to finally be able to transform its pilot body from being 80% white male to mostly non-white. Yet a disproportionately large number of the non-white pilots left the airline for greener, or sandier, shores. 

The government is leading taxpayers down the garden path. From its continual delaying, it can only be concluded that it has little or no intention of completing the Takatso deal. And so SAA will continue to struggle along, with obsolete aircraft and unable to attract quality management. The losses will continue. Pravin’s promises of no more bailouts are already being revealed to be meaningless. DM

  • Story corrected to reflect that it was Air Chefs not Mango which made a positive contribution to SAA's 2022 results.

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