Looks like our theory is holding up. Government support is a big player in the industry during these trying times. That’s why, after the South African government pulled it’s funding, South African Airways’ story seems to be coming to an end. Lets see what happened to South African Airways.
Situation going in
Even before COVID19 struck, South African Airways had been in some trouble. They have been receiving government funding for years prior to this. They have not been profitable over at least the last 11 years. And they have lost over 1.4 billion USD over the last 6.
What has happened?
The typical government response to the COVID19 crisis, specifically for airlines, has been to chuck money at them to keep them above water. South Africa has seemingly taken a different approach, cut the funding for the airline (Bloomberg), and is redirecting the funds from to other priorities. Their position is that, with the COVID19 economic fallout, there is not way they can keep this afloat. This has left an already under-performing airline in a dire situation. Private investors were hard to find in good times for South African Airways. With the COVID19 situation, private funding for Airlines is even harder now.
What is the result?
South African Airways has been left with a double (or even triple) whammy. Already loosing money, the airline has lost a significant portion of revenue from ticket sales, and now the government funding that was keeping them afloat. As a result, they are ceasing operations. All 4,700 staff are being laid off, and assets are being sold.
Star alliance is loosing a partner, and South Africa is loosing their flagship carrier. Barring some act of god, it seems like this is the end of South African Airways.