Humanity took a giant step forward when Apartheid ended in 1994. Soon thereafter SAA began to regain its landing and fly over rights. Slowly but surely SAA regained its economic bearings and reestablished itself as a world-class carrier. In my opinion the airlines soon recovered from the sanctions imposed upon it during the time of apartheid. From what I have read and listening to travelers who flew SAA during apartheid, the airlines always offered excellent services.

Now that black rule has come to SA and with it black control of SAA, the question must now be asked; will the flagship carrier ever return to its glory days?  I think recent events show that the airline is not being managed properly. Political considerations have seemed to come into play in the management of SA’s flagship carrier.

On October 2, 2012 the SA government announced that it was providing a bailout of $600 million to SAA. This latest financial help will take the form of loan guarantees that will give would-be investors with the promise that the government will stump up for any unpaid loans. “The guarantees will enable SAA to borrow from the financial markets, thus ensuring that the airline continues to run as a going concern,” government officials said. The problems at the Lonmin mine and other mines across the country has tainted SA reputation as safe harbor for investors’ money. In my opinion investors are not going to lend money or invest in SA troubled airline industry based upon guarantees of government that might not be able to pay if the need arises.

In announcing the bailout the head of the Department of Public Enterprise stated that the SAA had to develop a turnaround strategy. The recovery plan would have to be reviewed and approved by his agency and the Finance Minister. The announcement exposed for the world to see SAA’s weak financial position. Mr. Gigabe, who heads the agency, stated that he had directed the airlines not to publish its 2012 financial report which was due 6 months after is fiscal year ended. The beleaguered company had until October 1, 2012 to hold its annual meeting and release the report. He cancelled the meeting and report with the explanation that the company had to first stabilize and organize its finances. Most experts in the field of aviation and finance believe that the government wants to manipulate the perception that the company is “an on going concern.”  Furthermore an injection of cash into the airlines coffers would not have any impact on the calculations necessary to complete the 2012 financial reports.

It must be noted SAA is scheduled to purchase 20 A320 Airbus airlines over the next 5 years. It is possible that this order might have to be scaled down or cancelled altogether. The company might not be able to afford the additionally debt. Such a step backwards would surely dent its image among consumers and service providers. Such a decision would affect its ability to borrow money. I believe that decisions are being made in the offices of many international lending institutions that SAA is not credit worthy regardless of the government’s injecting money into the company. There have been two previous bailouts of the company. The last one was for substantially more money than is now being promised.

Making matters worst for SA’s airline industry is the perception that every sector is being managed incorrectly. Earlier this year rumors circulated that South Africa’s LCC Velvet Sky  (LCC Velvet) might be shut down. This smaller airline services the airplanes of SAA and other regional and international carriers. Apparently SA, the government, caused a controversy by offering the airlines preferential treatment at one of its airports. Other carriers were not offered the same accommodation. Employees at other airlines immediately protested the government’s preferential treatment. Workers at LCC Velvet were being put into a better financial position then they were. Competition among all the industry’s players was being manipulate and directed by the government. There was no legitimate business reason for the granting of the accommodation.

I do not believe that any major company that operates in a highly competitive market can be profitable when its management is constantly at odds with itself. Management composition is constantly changing. In business this is a given. Yet: the company’s overall vision and quest for efficiency and profitability should always be a constant. This is clearly not the case at SAA as recent events have shown.

At the time of the bailout the CEO of SAA was Siza Mzimela. In interviews with the press and before parliamentary committees she had always put forth a coherent and prudent vision for the airline to become profitable. She always took pains when discussing the company’s fortunes to stress that the airline, albeit the SA airline’s industry in general, must not continue to operate in isolation. Implicit in her comments was a belief that the SA government was preventing competition where it was needed.