DBEA55AED16C0C92252A6554BC1553B2 Clicky DBEA55AED16C0C92252A6554BC1553B2 Clicky
April 12, 2024
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[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.

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1 thought on “Southern Africa’s state owned airlines

  1. To add to the SAA part: (source unknown via Facebook, to give correct credit)

    SAA pilots vow to get rid of board
    Head of the South African Airways Pilots’ Association (Saapa) captain John Harty has been accused of plotting to sabotage a plane to discredit the black pilot flying it.

    These accusations, strongly denied by Harty, are the subject of an investigation by the Directorate for Priority Crimes (Hawks), SAAPA said in a statement on Monday.

    According to the statement, Harty was summoned to Douglasdale Police Station by the Hawks on Friday Dec 4. Harty said he was informed by Hawks officials, including two brigadiers, “that they were in possession of ‘intelligence’ that certain pilots – namely myself – had attempted to recruit SAA technicians to tamper with the rudder system of an aircraft in order to sabotage it & thereby discredit the black pilot who’d be flying it. If the allegations weren’t treated with such seriousness by the Hawks I’d have laughed at the sheer absurdity of them,” Harty said.

    He said as the Hawks seemingly believe this ‘intelligence’ has veracity, he would like to state that he is prepared to cooperate fully with any legally competent, objective investigation, “as there is not a single shred of evidence that will corroborate this allegation. This ‘intelligence’ has a whiff of intimidation. Neither I nor my association will be intimidated and forced to back down in our efforts to ensure that the SAA Board is replaced by people with aviation management expertise and that a CEO with appropriate skills and experience is appointed.”

    3 weeks ago Saapa adopted a vote of no confidence in SAA Board chairperson Dudu Myeni and the non-executive directors, after Myeni reportedly said pilots were being paid too much.

    Hawks spokesperson Hangwani Mulaudzi could not be reached for comment.

    Saapa will be meeting again on Thursday to update its members and reassure them about concerns regarding the future of the airline. Moneyweb has been told the pilots will also discuss different options aimed at restoring proper governance at the airline, including applying for business rescue and industrial action.

    Swap agreement
    The above events follow the SAA board having until December 21 to implement the so-called swap agreement with Airbus that will convert an onerous purchase agreement into a lease agreement with the aircraft manufacturer. National Treasury earlier approved the deal, that was signed by then acting CEO Nico Bezuidenhout, but the board refused to ratify it, suggesting the insertion of a local leasing agent instead.

    Finance minister Nhlanhla Nene on Friday announced that he rejected this variation of the agreed upon swap transaction & warned the board against acting without Treasury approval.

    In its statement, Treasury said Airbus gave SAA until Dec. 21 to implement the deal.

    Deputy President Cyril Ramaphosa said government is finalising the appointment of a new board to ensure good governance. The airline is currently functioning with only 3 interim board members & without a permanent CEO & CFO and its commercial head has been suspended.

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