South African Airways (SAA) has been an embarrassment to the country in the past few weeks. The drug scandal has ruined South Africa’s image making the country look like a haven for drug syndicates. If you have been following the SAA debacle for the past few months, you’ll know that drug smuggling is not the only detrimental issue it has had to deal with.
The only way to save the state-owned airline from further humiliation is to shut it down or privatize it. There has been a national outcry since the Finance Minister, Trevor Manuel, said R1.6 billion was to be allocated to SAA in support of its turnaround strategy, in his recent budget speech. Political parties and ordinary citizens are up in arms about this and many feel that the money should be used to alleviate poverty and not to bail out SAA once again.
Manuel has, however, defended his position stating that the government had to intervene because the absence of such interventions could sink an enterprise which could otherwise be brought to sustainability. Addressing Parliament, Manuel said; “I am sure that the House will agree with my hope that this will not be a recurring allocation.”
While the finance minister clings onto hopes that situation will improve, let’s look at how SAA got into this mess.
Bad Management
It all started with the appointment of SAA’s CEO Khaya Ngqula, who was given the job despite his lack of experience in the aviation sector, in 2004. Soon after his arrival, Deputy CEO Ovama Mabandla, who thought he was being groomed for the CEO position, quit SAA. This was the first of many resignations to follow under Ngqula’s leadership.
Next to go was the Chief Operating Officer, Kryl Anton, who couldn’t handle Khaya’s bad management style. Within nine months the SAA Pilots’ Association had named him the worst the worst manager in SAA’s history and SAA had lost 11 employees for getting on his wrong side.
Financial Mismanagement
A couple of weeks ago, SAA’s Chief Financial Officer, Kaushik Patel, told Parliament that the airline lost R1,1 billion in the 2008 financial year, and a further R800 million in the previous year. While Treasury claims that this loss was “largely due to restructuring costs of R1.3 billion and fuel price volatility”, Patel also said reckless hedging against the rand by the previous management was responsible for the loss. SAA is in so much debt that it had asked the government for a R5.6 billion rescue package.
Ngqula who is now on ‘special leave’ is being investigated for financial mismanagement. Last year he and his top managers were accused of paying themselves a monthly retention bonus. Recent newspaper reports also claim that Ngqula gave his wife’s catering company a R3.5 billion deal to supply about 180 000 weekly in-flight meals on SAA’s domestic routes.
SAA Strikes
In 2005 SAA experienced the worst strike in its history and the airline lost close to R50 million a day for six days. This year hundreds of SAA workers were on strike again – this time over job structure changes, payment disputes and the retention bonuses SAA’s managers are getting paid.
Drug Smuggling
Within the space of one month, SAA crew members have been caught in possession of drugs at London’s Heathrow twice. The first incident happened in January 2009 after British officials found 50kg of dagga and 4kg of cocaine in three suitcases. 15 crew members were detained. Less than a month later another 2.5kg of cocaine was found in a handbag in the crew bus.
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