South African Airways might have a pretty decent record when it comes to aviation safety, but their financial situation has long been in a nosedive that now seems too drastic to turn around.

According to the editor of FlySA Magazine, Guy Leitch, with some crude calculation SAA is losing around R500 for every ticket they sell.

That’s taking their estimated R3 billion annual loss into consideration, although that number is just the tip of the iceberg.

Last week saw the National Treasury announce another R2,2 billion payment to SAA so they could avoid defaulting on a loan repayment, but let’s head to BusinessTech for the gruesome details:

“This is the beginning of perhaps the end of a pack of cards falling. There is another R9 billion in loans due for repayment by the end of June, and if Standard Chartered wouldn’t renew theirs, then probably the other lenders won’t,” Leitch said.

If just one loan is defaulted on, Leitch said, the conditions of all the other outstanding loans changes and they will all have to be called in. This would increase the order from R9 billion to around R19 billion, he said.

“And let me point out that this money is not immediately available, which is why they had to raid the economic fund at this stage – and there’s talk that they will raid the government’s pension fund next,” he said.

That’s right, the financial mismanagement is so bad that they’re going to pilfer from the pension fund’s coffers.

The sad thing is that this has been a long time coming, with losses of R1,9 billion for the 2015 financial year, following a R1,5 billion loss in 2014.

2016’s numbers aren’t set to get any better, with some estimating the financial year will see a loss as high as R4,5 billion.

Finance minister Malusi Gigaba said that, because of the risk of defaulting on the loan, the SAA bailout was urgently needed, and would not impact the fiscus as it was drawn from the country’s National Revenue Fund.

However, the minister has faced criticism for giving SAA a ‘free ride’, by signing off on the bailout without attaching strict conditions – like getting rid of defiant SAA chair, Dudu Myeni [above], who has overseen multi-billion rand losses at the airline during her tenure.

It’s frightening how low the bar is set, and yet some folks still manage to shimmy their way under it.

[source:businesstech]