South African flag carrier to remain state-owned, despite criticism from industry

South Africa's public enterprises minister, Alec Erwin, has made it clear South African Airways is not up for privatisation. "We'll keep SAA a state enterprise, but we will build it up so it is stable," he says.

Erwin has told the Airlines Association of Southern Africa (AASA) that the government has decided that the transport sector is too important to the state to allow SAA to be sold off. "The South African economy is growing and the economics favour transport," he says. "Our decision is based on hard-nosed assessments. That does not mean we don't want private sector involvement. We'll see in the next year some dramatic investments in the transport system."

Erwin said the government would take measures in the next few months to recapitalise SAA, which is expected to forge partnerships with airlines in Africa, Europe and Asia. It would also seek improved efficiencies and lower costs at the airline, although not at the expense of its 11,000 employees, who would all remain. "The people at SAA are of a high calibre and that is what we'll invest in."

Erwin said the government had set up a Competitions Commission to answer protracted industry criticism of SAA's monopoly position. He said the airline's R15 billion ($2.4 billion) loss in the two years following its disastrous fuel hedging policy "should not, in hindsight, have been allowed to happen".

SAA's competitors and aviation industry leaders have long called for the flag carrier to be privatised, and AASA chief executive John Morrison says: "If the private sector has to compete with loss-making subsidised airlines, private-sector aviation development will be severely restricted. The major leadership role that airlines expect from governments is in facilitating the development of aviation, not in competing with the private sector."

After a string of airline closures in the 1990s, South Africa strengthened SAA's corporate identity and brought in ex-World Airways chief executive Coleman Andrews to turn it around. It then tried unsuccessfully to sell off 30% of the carrier to the now defunct Swissair and had to be bailed out by the Swiss government when Swissair went under.



Source: Flight International