When a company is on a downward spiral, forces on the outside help push the forces to go faster downhill. A case in point is South African Airways as described in an article by Alexander Winning of Reuters. South African Airways (SAA) has not made a profit since 2011, and has been struggling with an unprofitable network, inefficient planes and a bloated work force despite the government bailing them out for $1.8 billion in the past 3 years.
There was a 8 day strike when 2 of its biggest unions wanted increase pay and the airline was forced to cancel hundreds of flights.
Banks now want government guarantees before they will lend SAA money.
The coffin is being shut as 2 big travel insurance companies stopped covering tickets issued by SAA against insolvency. Santam’s Travel Insurance Consultants (TIC) and Flight Center Travel Group said it would stop selling SAA tickets.
The President of South Africa has said the bailouts of the airline must stop, but the Public Enterprises Minster was to save SAA with another bailout to keep the airline afloat. The Finance Minister has refused to sign a bailout.
The Board and Executives of SAA were in intense discussions with the government and exploring all options regarding the future of SAA. The company is still in business trying to pay its staff and be the airline of the country.
Linking to dividend paying stocks, when things go bad, they seem like a big rock rolling down the hill, it will take a supreme effort by the government to stop or slow down the speed of the rock, if they are willing to make make tough decisions besides to hope for the best and bailout the airline for another few months. Is there political will in South Africa? The lesson to be learnt is when the insurance companies begin to bail out, there is very little time left.
There are more questions than answers, till the next time – to raising questions.