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Should we have a national carrier?


Many countries have flag carriers – the list includes France, the United Kingdom, Australia, Turkey, Iceland Singapore and South Africa. The United States is not on the list.

This begs the question “Why doesn’t the world’s largest economy have its own national airline?”  The second question to ask is: “If the United States feels it cannot justify bank-rolling a national airline, does it make sense for South Africa to do so?”

Many arguments have been advanced to justify a national carrier. Obvious reasons include patriotism and the need to showcase the country’s brand, culture and cuisine. Singapore airlines is very good at this – the food is Singaporean and the crew are very distinctive in their airline uniform.

None of this holds true for SAA. There is nothing typically south African about the crew’s uniform, neither does the food showcase our national cuisine. I have never seen any biltong, bobotie, bunny chow, mogodi with tig, melktert or koeksisters on the menu. SAA does not showcase the country’s brand, culture or cuisine.

SAA has enjoyed a lot of media coverage, mostly negative. A very positive article published in the Sunday Times Business Times on 27 May: “Africa stands to lose if SAA sinks. So does Jo’burg,” got me thinking.

The article points out SAA “is begging government for billons of rands to remain a going concern.” Last year, government gave SAA R10bn bailout. This year, the new CEO has asked for around R5bn. R9.2bn in debt is due to be repaid in 2019.

The authors, Ray Ndlovu cite some interesting facts:

  • SAA services 25 routes
  • Zimbabwe is SAA’s most lucrative route (ten flights daily into Zimbabwe, 370 000 passengers annually)
  • Most lucrative routes for SAA, Johannesburg-Lusaka, Johannesburg-London, Johannesburg-Maputo, Johannesburg-Windhoek
  • Unprofitable routes cost SAA around R350 million per month
  • If SAA were to fold, there would be a loss of 10 000 jobs
  • Without a strong SAA presence on the continent, “the shine could come off Johannesburg.”

 
It is important to add the following facts:

  • During the 2016/2017 financial year, SA made a loss of R5.6bn
  • SAA has run at a loss for the past seven years
  • 2014 figures indicate that it cost SAA R1,218,344 to keep each job

I have always admired Warren Buffett. He is ranked the world’s 3rd wealthiest individual in 2018 ($91.3bn). His credentials confirm that there is merit in what he says. In 2008 he wrote the following to Berkshire Hathaway shareholders: “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little of no money. Think airlines. Here a durable competitive advantage has proven elusive since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favour by shooting Orville down.”

Taxpayers will agree that SAA has proved a bottomless pit. Should our leaders shut down the airline and allocate the funding elsewhere? Should government privatise the airline? Is it a bridge too far to hope that SAA could be turned around and operate as a profitable business? Can we learn from the USA, or from Buffett? Should we?

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