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Insurers Now Running Away from South African Airways

Two big travel insurance companies in South Africa have stopped covering tickets issued by South African Airways (SAA) against insolvency as doubts grow about whether the struggling state-owned airline can survive.

While the move is unlikely to push SAA into liquidation by itself, it will hurt ticket sales and exacerbate a cash crunch that left the airline unable to pay salaries on time this month, analysts said.

SAA has not made a profit since 2011 and has been struggling with an unprofitable network, inefficient planes and a bloated workforce, despite bailouts of more than 20 billion rand ($1.4 billion) over the past three years.

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Its financial position worsened dramatically after Nov. 15, when two of its largest unions began an eight-day strike over pay that forced SAA to cancel hundreds of flights.

Banks want additional guarantees from the state before they lend SAA more money but Finance Minister Tito Mboweni has refused, leaving the airline’s finances on a knife edge.

Public Enterprises Minister Pravin Gordhan still wants to save SAA, which says it needs to more than 2 billion rand ($136 million) quickly to stay afloat.

President Cyril Ramaphosa has stayed out of the tussle so far but the longer Mboweni refuses to sign off on guarantees, the more likely it is that SAA will shut down – an outcome an SAA board member said last week was a possibility.

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Written by How Africa

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