kulula lambastes yet another SAA bailout

Johannesburg - February 12, 2009 – Yesterday’s government budget bailout for loss-making parastatal SAA (including Mango airlines) has been strongly condemned by kulula.com

“In effect, South African taxpayers are giving SAA and Mango another financial lifeline during a time of great economic difficulties and massive social challenges,” said Erik Venter, Joint CEO of kulula’s parent company Comair Limited.

“To put it in context, the R1,6 billion could have been channeled towards building over 30,000 low cost houses”, added Venter.  The domestic airline industry serves the top 10 percent of earners in South Africa and bailing out SAA can hardly be considered social spending.”

Contrary to Treasury’s expectation that bailouts for the airline will not be a “recurring allocation”, kulula expects the state-supported airline to be back at the begging bowl again. “If SAA and Mango make a profit next year, I’ll eat nothing but SAA on-board catering for a month,” challenged Venter.  “Over the past five years, the government has handed over R15-billion of public funds to a company that has yet to make a profit.”

Booing the Finance Minister

Loud booing followed yesterday’s announcement by Finance Minister Trevor Manuel regarding another cash injection for the loss-making airline. “We hope that this is a sign that South Africans have had enough of wasting the taxes of hard-working citizens,” continued Venter.

Kulula has for a long time argued that South Africa does not need state-owned airlines, a position supported by evidence that privatisation results in better run airlines.  A string of private airlines in South Africa have failed, most recently Nationwide, unable to compete with the bottomless pockets of the state.  “The ongoing subsidising of SAA and Mango grossly distorts the competitive landscape in our country and must end, otherwise more private airlines will disappear.”

Airport charges increased

Prior to the budget speech, the Airports Company South Africa (ACSA) announced a 18.5 percent tariff increase on air fares to pay for its multibillion-rand capital expenditure programme, currently running at R17-billion until 2012.  This programme includes the controversial R8BN La Mercy project in Durban. “In the face of declining air passenger numbers and a global economic crisis, South Africans are being asked to foot the bill for infrastructure developments because the government is unable or unwilling to pay for them itself,” noted Venter.  “Surely it makes more sense to invest in our country’s air travel infrastructure rather than a loss-making airline,” concluded Venter.