Why would anyone want to own an airline?

Do you ask yourself difficult questions? What is the most difficult question you have ever asked yourself? Or someone else?

The most difficult questions often relate to abstract things, because abstractions are by definition slippery. So you could ask yourself, for example, what is success? What is joy? What is happiness? Etc, etc.

So let’s take those off the table. What is the world’s most difficult question that isn’t abstract by nature? Something concrete. Something specific. For me, one question that immediately comes to mind is this: why in heaven’s name does anyone want to own an airline?

One big advantage of the airline industry is that it’s heavily regulated, so unlike many other industries, we know many of the facts on a global scale. And fact No 1 is that the global airline industry lost $140-billion in 2020, the International Air Transport Association (IATA) tells us. So that was a bad year, but understandable because of the Covid-19 pandemic. In 2021, the industry lost $60-billion. Also understandable — Covid. But still a bad year. In 2022, the industry looks likely to lose money again, but less, about $10-billion, give or take.

The incredible thing about these losses is that if you take them together, they add up to more than the airlines made collectively over the past decade. And the decade before Covid-19 was absolutely the blooming era of the airline industry. There were profits. Consecutive years of profits!

Before that, it was a good rule of thumb that it was almost impossible to run an airline profitably. Airlines in the US were going bankrupt at the rate of two or three a year, in the good years! In the bad years, around 2012, even the big ones like American Airlines and Delta went bankrupt. But as many die, many more are created or resurrected.

https://www.dailymaverick.co.za/article/2022-05-15-fuel-thieves-siphon-off-millions-from-mpumalanga-eskom-power-station/

Why is the airline industry such a tough business? Surely, it should be benefiting from the global rise in tourism, Covid notwithstanding? I suspect the answer is that it’s massively difficult to create meaningful differentiators. Flying on different airlines is, let’s face it, not that different. It’s still cramped, uncomfortable and generally nauseating in cattle class. It’s comparatively fabulous in business or first, but you do know you are going to have to explain to St Peter at the pearly gates how and why you made your company or your government pay an absolutely extortionate amount of money so you could have a lie-flat bed and the drink before take off, when you need it most.

Airlines have tried everything to circumvent the lack of real differentiators. Clubs, loyalty packages, even nationalism. And, of course, discounts, which forces competitors to discount, which trims margins. And then there are the massively vacillating fuel costs. It’s just brutal.

Locally, during the good years, our national airline SAA managed the conceptually impossible: it managed to lose money hand over fist. And every time it did, it went to the government, asked for a bailout and got more. There was corruption, of course, but arguably more pertinently, there was just brain deadness of galactic proportions. This is a well-known story.

So now, the government is trying to unscramble the egg, and this will surprise no one, but it’s obviously turning out to be much harder than it seems. Notionally, the government agreed to sell 51% of SAA to the Takatso consortium on 22 February this year.

Ever since, people have been asking, when is this deal going to be finalised? Finally, Scopa, the parliamentary committee on public accounts, got in on the act and asked what on earth was going on. A meeting was held last week. 

Historical liabilities