Most countries don’t own an airline - South Africa is part of a shrinking group, with only a handful making money

Business Insider SA
NEW YORK - AUGUST 24 : An Airbus A340-642 operated
An Airbus A340-642 operated by South African Airways takes off from JFK Airport on August 24, 2019 in the Queens borough of New York City. (Photo by Bruce Bennett/Getty Images)
  • Governments around the world still have financial interests in more than half of the world's flag-carrying airlines.
  • But as of the 80s, countries around the world surrendered control for financial reasons.
  • South Africa, along with Zimbabwe, India, Pakistan and Romania still have tight control over their airlines - all of which are in debt.
  • For more visit Business Insider South Africa.

Questions about the fate of South African Airways, which has more than R30 billion in debt and received R16.5bn in bailouts, are growing. 

The airline, which has been placed in business rescue, is quickly running out of cash. It has to secured R2 billion by this weekend to keep on flying.

The ANC’s national executive committee is expected to debate the future of SAA on Saturday.

TAKE A LOOK: These pictures show how SAA evolved over the past 86 years

At stake are thousands of jobs, and, for some, the status of having a national carrier. 

South African Airways is one of about 61 countries in the world that still has a state-controlled airline. But it is not a particularly prestigious club. 

Airlines with 100% government shareholdings include those belonging to the likes of India, Romania, Zimbabwe, and Pakistan - all of which are in debt to the tune of millions. 

Many of the world’s most prominent national airlines, such Air Canada, Qantas, Lufthansa, and British Airways, are no longer owned or even majority controlled by countries in which they originated. Some, like Air France, are partially privatised - with government still holding on to minority stakes. 

Although many now-privately owned airlines still technically fly the flag of their respective founding nations, some, such as Chile, Canada, Japan, and the United Kingdom, surrendered control as far back as the late-80s.  

Others, such as Mexico, Ireland, Bangladesh and Austria, hung onto their airlines for longer - and only moved out of the aviation business after the turn of the century. 

Pravin Gordhan
Public Enterprises minister Pravin Gordhan outlines plans for South African Airways during the World Economic Forum on Africa, held at the Cape Town International Convention Centre (CTICC) on September 06, 2019 in Cape Town. (Photo by Esa Alexander/Sunday Times/Gallo Images via Getty Images)

The reason so many countries cling to their flag carriers is believed to have its roots in the 1944 Chicago Convention of Civil Aviation. Like roads, railways, and bridges, national airlines were positioned as part of the national infrastructure and identity. In some cases, particularly in Africa, politicians may fear the gaps created by not having a national carrier. 

And since then, many governments have considered them a necessary point of pride, and used their control of the industry to their advantage. At the time, state-owned airlines operated in a bubble where governments restricted competition, set fares, and controlled routes. But the privatisation and liberalisation of the industry, along with the bloated state carriers’ inabilities to adapt, brought about the demise of many. 

Still, as recently as 2017, some have made the argument for the nationalistic importance of a government-owned airline. Former Skywise co-chair Tabassum Qadir said in reference to SAA that although conventional wisdom suggests states should not run airlines, there’s more at play than many people realise. 

 “A national carrier is an embassy with wings, transporting culture, cuisine, commerce and goodwill around the world,” she said. 

But these “embassies with wings” come at a cost, and South African Airways, which has received billions in bailouts, is also not the only airline to draw heavily on state funds.  

Similar trends of public funding and restructuring for flag carriers are common. Italy’s Alitalia has cost taxpayers R112 billion in the last decade, and it was ultimately forced to sell 49% of its business to Etihad Airways. Poland’s LOT received a government bailout to the equivalent of R3 billion in 2014.  

Ethiopian Airlines as the oldest airlines on the w
Ethiopian Airlines is a an example for the most successful airline in Africa. (Photo by Mas Agung Wilis/NurPhoto via Getty Images)

And Swissair, once so successful it earned the nickname “the flying bank”, also met its demise after several bailouts - which according to The Journal of Transport History, “can be explained partly by a change in the market environment and partly by Swissair’s inability to reform and adapt”. 

Examples of successful state-owned airlines exist, but are fairly limited. Singapore Airlines and Emirates are often touted as success stories. And in Africa, Ethiopian Airlines has been a notable exception to the state-owned trend - in 2018 the airline increased passenger numbers to become the largest carrier on the continent, overtaking SAA. 

See also: 5 things SAA can learn from Ethiopian Airlines - now Africa’s most profitable airline

According to the Helen Suzman Foundation’s Andrew Barlow, “The lessons for SAA’s shareholder, our government, are manifold and yet straightforward and easy to implement.” 

Key to its success, Barlow told Business Insider South Africa in 2018, is the airline’s independence.

“Though state-owned, [Ethiopian Airlines] is, first and foremost, a business,” he said.

A previous version of this article was published in November 2019.

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