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South African Airways nearing bankruptcy, could it be saved by Etihad?

SAA has 90 days to turn the company around

The national company of South Africa is in a complicated financial situation and has 90 days to save the company. If not, it’ll go bankrupt. Unless Eithad decides to come to the rescue.

Written by Laury-Anne CHOLEZ translated by Joséphine Foucher the 26/02/2015

South African Airways has 90 days to turn the company around - DR: Wikipedia
South African Airways has 90 days to turn the company around - DR: Wikipedia
Every penny counts.

To maintain its accounts, the company South African Airways replaced the glass of champagne with sparkling wine for the appetizer of its business passengers.

This anecdote retold by the newspaper Jeune Afrique says a lot about the company’s financial situation.

In fact, the national company registered a loss before taxes of 1.2 billion rands (106 million dollars) for the 2012-2013 terms, which is the most recent term of published financial results.

Tired of backing up its accounts, the government gave it 90 days to get its accounts back in balance. It still gave the company a loan of 6.4 billion rand, or €482 M.

Various factors explain this bad financial health. First of all, the depreciation of its currency, the Rand, that lost 34% during the 2013/2014 year.

Etihad could buy into the capital

Let’s also mention the accumulation of unprofitable airlines, especially amongst long-haul flights, such as that of Beijing and Mumbai.

This last two will actually be taken out.

The company also expects to reconfigure the route towards Washington and cancel the stop in Dakar.

These route modifications should not affect Europe, where South African Airways lands in Frankfurt, London, and Munich.

It doesn’t directly connect to Paris, but it is seducing French travelers living in the province routed via Lufthansa or British Airways in the three cities mentioned above.

In South Africa, the company accounts for 40% of domestic and international flights, 50% of the cargo, and contributes to 0.3% of the country’s GDP.

This illustrates its strong influence in the local economic development. Under these conditions, it is difficult to believe that the government will let it go down.

But the rescue could come from a partner company and the name of Etihad often comes up, according to information provided by Jeune Afrique.

Calculations that are not surprising, the Emirate company has often been called to the rescue of suffering companies.

Especially since it already has a code sharing agreement with South African Airways and will launch, next March, a flight towards Abu Dhabi.

A new step before engaging in financial contribution?

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