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Stalled Takatso Deal Deepens SAA's Crisis Amid Losses and Promises Unkept

Published February 29, 2024
4 months ago

In the intricate skies of South African aviation, the national carrier, South African Airways (SAA), has faced turbulent headwinds for decades. Following a lengthy period of decline, the airline was pitched to enter a new era through a partnership with the Takatso Consortium. However, recent developments suggest that the anticipated liftoff for this deal remains indefinitely delayed.

The roots of SAA's distress are deep and complex. Despite the introduction of SAA Version 2 and the government's stance against additional bailouts - a pledge that echoed the public's bailout fatigue - recent actions have betrayed these commitments. Public Enterprises Minister, Pravin Gordhan, was provided an extra R1-billion for what has been described as "business rescue purposes," challenging the credibility of the government's fiscal discipline.

The Takatso Consortium emerged as the supposed panacea for the ailment-stricken airline, with promises to inject new capital and expertise that would allow SAA to soar without the crutch of taxpayer funding. Nevertheless, after nearly three years since the announcement, Gordhan's withdrawal of the new SAA Bill from Parliament raises doubts about the government's true intentions for SAA's privatization.

Takatso's proposed R3-billion funding injection remains shrouded in mystery. The reluctance to consummate this deal underscores a broader issue plaguing the airline - an enduring scarcity of both capital and competencies that has persisted for a quarter of a century.

SAA's troubled ledger is not new. Between 2001 and 2010, the carrier hemorrhaged roughly R1-billion annually, a considerable sum rationalized by the alleged economic benefits delivered. During Dudu Myeni's tenure, losses ballooned, reaching an untenable R6-billion per year.

Government support persisted, bolstered by justifications ranging from skills development to retaining airfare within local coffers. Yet as opposing voices were effectively marginalized, the South African taxpayer was left to shoulder these financial burdens.

In an attempt to restructure the floundering airline, a business rescue plan was implemented, infusing R26-billion under the guise of debt relief and operational overhaul. Creditor concessions enabled SAA to present a renewed facade - debt-free and primed for the Takatso partnership.

Desperate to stem the hemorrhaging, SAA dramatically cut its workforce, ultimately claiming profitability and cash-flow positivity – a brief honeymoon that would soon end. The emergence from the pandemic did little to resuscitate SAA, which conspicuously lagged behind the global industry's recovery rate.

2023 financial figures depicted a company still in disarray, as losses approached R761-million. Moving into 2024, the airline's deficit not only persisted but is projected to reach approximately R1-billion.

At the heart of SAA's perpetual dysfunction are operational deficiencies, particularly an inability to procure the necessary aircraft to revive former routes or to venture into new markets. Alongside infrastructural constraints, the airline also faces a talent drain. While it sought to diversify its pilot demographic post-business rescue, many have since departed in search of more secure horizons.

The government's protracted procrastination concerning the Takatso deal directs to an unsettling conclusion: it may never have the resolve to finalize it. This leaves SAA in an ongoing state of precarity, with outdated fleets and a management vacuum.

As losses mount and the prospect of future bailouts appears inevitable, Gordhan's assurances fade into irrelevance. This prompts an urgent reassessment of SAA's direction and the government's role in directing it toward a stable altitude or conceding to an orchestrated descent.

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