The global aviation industry is facing a battering as the deadly coronavirus pandemic continues wreak havoc with the world economy. With so many countries around the world in lockdown, planes have been grounded, leisure and business travel has been halted, leaving the aviation sector teetering on the brink.
According to the International Air Transport Association, airlines are set to lose more than 50% of their revenue this year, amounting to a reduction of over $300 billion dollars. These unprecedented losses are crippling the industry and according to IATA Director General, Alexandre de Juniac, airlines need state intervention in order to survive, “financial relief for airlines today should be a critical policy measure for governments,” de Juniac said.
IATA has also expressed grave concern for the aviation industry’s 2.7 million jobs globally, “every airline job saved will keep 24 more people employed. And it will give airlines a fighting chance of being viable businesses that are ready to lead the recovery by connecting economies when the pandemic is contained. If airlines are not ready, the economic pain of COVID-19 will be unnecessarily prolonged,” de Juniac said.
Here in South Africa the government has run out of funds and patience with its own airline SAA. Government recently refused a $500 million funding request by the airline’s business rescue practitioners, it also refused to provide any more government backed guarantees. This has clipped Africa’s oldest airline’s wings, possibly for good.
South Africa is currently fighting sub-saharan Africa’s biggest Covid-19 pandemic, with over 3000 cases and the peak not yet reached, the country can ill-afford to keep throwing money into the SAA black hole. The airline hasn’t turned a profit since 2011, has debt of over $600 million and has made cumulative losses of over $2 billion over the past decade; for many economists, trying to save an airline in such a perilous financial position would be a slap in the face to South African tax payers.
In a letter addressed to SAA’s business rescue practitioners, government called for the airline management to consider its “options with the available resources.”
It’s unclear what resources SAA has, but without funding, prospects look grim. The airline faces liquidation and nearly 5000 jobs are on the line and this will exacerbate South Africa’s economic crisis. The jobless rate is 29 %, and is projected to grow as the Covid-19 pandemic will shrink the economy. Finance Minister Tito Mboweni has warned South Africa faces a deep recession, and has mooted a basic income grant to shield households during this period. Mboweni says Treasury will reprioritize the budget to give the department of health enough resources, while other projects will be put on the back burner.
It’s clear from the finance minister’s stance that SAA is one of the items on the backburner, so the airline could be Africa’s first casualty in an industry that’s battling to stay up.