[UPDATE 2: The Economist]
[UPDATE 1: South African President Zuma, taking a page from Mugabe Management 101, has fired his minister of finance. Mr. Zuma is not educated and struggles with numbers. There is alarm about this firing, with the currency taking a dive as rating agencies revise ratings downward. The firing of Mr. Nene will allow the current SAA CEO to push her idea to redo an agreement with Airbus. We bet that Airbus will impose legal sanctions on SAA if it does not abide by the agreement. This would cause SAA to face penalties it cannot pay.]
Readers are familiar with the fact that we are not fans of state owned airlines. Taxpayers are typically not well served funding airlines (we know there are exceptions). It would seem the region most negatively impacted by state owned airlines these days is southern Africa.
South African Airways has been a mess for some time. This airline has a long standing “jobs for pals” approach that has never worked well. Management recently has become a joke. What company can survive seven CEOs in three years? The current CEO is apparently a friend of the president, which qualifies a person to run a state corporation in some places. This CEO decided to upset a deal carefully negotiated with Airbus. Airbus is reported to have reacted, shall we say, unfavorably. South Africa’s Finance Minister (the one ultimately where the buck stops) clipped the airline’s CEO’s wings. We are probably looking at another CEO replacement.
Meanwhile to the west, Air Botswana is stumbling too. Note the airline’s GM is accused of “stacking the Air Botswana top management with his countrymen”. Here we go again. The board has been fired. The airline is reported elsewhere to have put its fleet of ARJs up for sale. There has been no good news from this airline for a long time.
To the north is Air Zimbabwe. (We saved the best for last.) Zimbabwe has been under the leadership of its president since December 22, 1987. During this time the country has steadily become poorer and the 91-year old president wants to stay in charge. Is it surprising then that he also wants to manage the national airline? By granting the airline immunity from creditors he thinks this will save the airline. But this doesn’t always work. The airline is hemorrhaging employees.
The Bottom Line
If you expect a bottom-line that’s in black ink from a state-run airline, especially in Southern Africa, where corruption and cronyism are rampant. Even with strong management, airlines in these markets have difficulty earning money. It is difficult to find state-run airlines that give Air India a run for their money, but southern Africa is running a close second.