South Africa President Objects to Airline Plan to Cut Routes
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South African President Cyril Ramaphosa said the government disagrees with a decision by administrators of the country’s state-owned airline to cut almost all domestic routes as part of a turnaround plan.
South African Airways is “an economic enabler, it enables people to move around the country,” he told broadcaster eNCA on Friday. “We want to find out what the rationale is and we want to have a discussion with them.”
The government placed loss-making SAA into a local form of bankruptcy protection in December to try and end a cycle of regular state bailouts and battles with creditors. Administrators led by Johannesburg-based Matuson & Associates said this week the airline would stop flying to nine international cities, including Hong Kong and Sao Paulo, and cease all local services except those between Johannesburg and Cape Town.
Under South Africa’s bankruptcy laws, the business rescue team has almost unfettered powers to manage SAA, and any attempt by the government to interfere could place the entire process at risk. It would also cast doubt over its commitment to take unpopular decisions to turn around other struggling state companies.
SAA’s domestic low-cost carrier Mango flies the routes being discontinued and is unaffected by the plan. Privately owned airlines operating in the country include Comair Ltd.-owned Kulula, FlySafair and Airlink.
“We would like SAA to remain a robust and successful airline,” Ramaphosa said before traveling to Ethiopia for a meeting with fellow African leaders. “That is why we took the decision not to close SAA, but to ensure SAA is revamped, is resuscitated and is operating profitably.”
Public Enterprises Minister Pravin Gordhan said the announcement on the flight cuts may jeopardize SAA’s long-term future, and the government will propose the decision be reviewed. The business rescue team needs to balance trimming unprofitable routes with ensuring the future sustainability of the airline and the domestic aviation industry, he said in an emailed statement.
(Updates with minister’s comments starting in penultimate paragraph)
--With assistance from Mike Cohen.
To contact the reporters on this story: Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net;Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net
To contact the editors responsible for this story: Gordon Bell at gbell16@bloomberg.net, John Bowker, Hilton Shone
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