South Africa’s oldest airline facing serious challenges

South African Airways’ (SAA’s) latest annual report revealed that the airline is facing turbulence. It must overcome significant challenges to ensure it stays afloat.

South African Airways (SAA) was established on 1 February 1934, when the government took over the assets and liabilities of Union Airways.

For the first few decades, the state-owned flag carrier airline operated under the control of the South African Railways and Harbours Administration.

It eventually became an independent state-owned entity and was initially protected from domestic competition. It was a well-run and globally respected airline.

As South Africa transitioned to democracy, the airline faced a more competitive global and domestic landscape. However, it was still a well-run company then.

The most damaging period in the airline’s history was under the Jacob Zuma presidency, during which mismanagement and corruption crushed the company.

For a decade, SAA failed to record a single profitable year, with annual losses often exceeding R5 billion annually.

The South African government spent roughly R38 billion in taxpayer-funded bailouts to keep the airline afloat.

However, it proved unsustainable, and in December 2019, SAA became the most high-profile company in South African history to enter voluntary business rescue.

It stopped all commercial operations in 2020 during the COVID-19 pandemic before exiting the rescue process in April 2021.

South African Airways relaunched in 2021. However, it was a shadow of its former self with only a few local and international routes.

It only flies to a handful of international destinations, and it also has far fewer local routes than previously.

However, it has big expansion plans. It has set its sights on returning to the United States by the end of 2026.

It has also issued a request for proposals to purchase 28 new-generation aircraft to be delivered starting in 2032.

SAA is facing serious challenges

South African Airways’ 2025 annual report highlighted many of the challenges the airline faces, including governance and operations issues.

The first is poor financial reporting. SAA received a disclaimed audit outcome, which the company’s audit committee described as concerning.

The committee reported that the system of internal controls, governance, and risk management is inadequate and ineffective.

Significant deficiencies were noted in record-keeping, procurement, revenue management, and subsidiary oversight.

The airline has also missed its financial targets. It recorded negative Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of R443 million.

This was well below the target of R241 million, and the Auditor-General estimated that the true figures could even be materially less than reported.

SAA reported irregular expenditure of R504 million. Curiously, investigations into irregular expenditure were not performed.

The company is also facing ongoing Special Investigating Unit (SIU) investigations into past fraud, corruption, and maladministration.

These and other problems have raised concerns about South African Airways’ going-concern status.

While the Board believes the airline is a going concern, the Auditor-General’s report explicitly noted material uncertainties.

“SAA has a favourable equity position of R6.6 billion as reflected in the statement of assets and liabilities,” the company said.

It added that it is stabilising and scaling its operations, and that its business model is geared towards the airline producing positive operational results.

However, the report highlighted that uncertainties remain regarding the airline’s going-concern assumption.

These include risks related to the timely delivery of leased aircraft and the unpredictability of cash inflows from asset disposals.

The historical operating profits and cash flows remain below sustainable levels, raising concerns about SAA’s ability to generate sufficient resources to fund its operations.

“Achieving sustainable positive operating cash flow depends on converting the increased fleet into higher load factors and yields,” the report states.

“Underperformance against the plan will necessitate additional funding requirements or accelerated cost controls to support operations.”