FlightCom Magazine 21
Before we start – are your offices
bugged?
Yes I believe so – but then I am the only
person in the world who thinks they should
be bugged because they will learn so much
from listening to me!
Is there any place in today’s aviation
environment for a flag carrier?
My understanding of a flag carrier is
that it is something that arose in the early
days of flying when having an airline was a
source of national pride as poor countries
never had airlines. But now I have to ask –
who will see your flag? Those who happen
to see your plane standing at a gate in some
foreign airport? The reality is that not many
people will see it – if you really want to fly
your flag, put it up at a trade commission of
consulate.
The whole notion of a flag carrier is and
always was absurd. No one notices or cares.
Now it’s even more pointless because every
banana republic has an airline so it’s not even
a sign of prestige or advancement. In fact the
opposite is true. If you now have a national
airline it’s a sign of being a banana republic.
If anyone notices, they will conclude that
South Africa is a backward country where
the government still runs an airline.
You advocate liquidating SAA. Why?
Do you imagine someone in the
private sector will step in and buy up
the pieces and continue to provide an
international airline service to and
from SA?
Yes – I am a lawyer by training and
insolvency law is very simple. You surrender
the assets to the creditors. Creditors are very
well organised, especially when it’s a big
liquidation, when it comes to damage control.
They have very sophisticated mechanisms
to ensure minimum loss of staff, assets or
revenue. In other words they will see to it
that the airline’s assets are used optimally
and quickly, especially if liquidated, as it
should be, by Treasury asking for bids or a
tender for someone to take over the routes,
staff and the planes. I would imagine that not
one single customer will be inconvenienced,
staff will be re-employed with better training
and pay, and assets sold or better utilised.It seems to me there are three
problems with insolvency – the first
is that the only significant creditor is
the government. So that would mean
surrendering the airline to itself
which doesn’t make much sense.
The second is that the history of
liquidators in South Africa has been
appalling. It must be one of the most
corrupt professions. The third point
is that the history of liquidating
airlines in South Africa has not been
good – look at the disaster of 1time
and how that dragged out through
business rescue and then eventually
collapsed into nothing.
There is a big difference between
business rescue and judicial management, on
the one hand, and a liquidator on the other.
The people who practice business rescue
want to drag things out; a liquidator wants
to cut losses and maximise returns. I think
business rescue is a bad idea. The correct
thing to do would be to hand it over to one
of the big accounting firms and ask them to
tell us how to wind this operation up with
minimal disruption. It is obviously never
going to run properly and in fact it never has.
Under apartheid it was only ever a protected
monopoly.Yet in the USA Chapter 11
bankruptcy is almost a rite of passage
for an airline to survive by shedding
routes and staff and compromising
creditors.Yes, and that’s not good because all that
happens is that you institutionalise failure.
My view is that where there is failure, start
again with a clean slate by selling assets
to investors risking their own money. Bear
in mind liquidation is not a loss – it is
actually a gain. The assets, both human and
physical, are still there. What you have is the
assets being more valuable than they were
because they are now under new and better
management. And if they aren’t, then they
get liquidated again. Liquidation is the best
way to get assets into the very best hands.That may be the theory, but an asset
without management support can
be valueless. Particularly in an airline
context where you have bilaterals and
slots at Heathrow to be maintained.
All of these aspects make the whole
greater than the sum of the parts.
If the airline is running at a loss, its slots
at Heathrow are a net loss to the economy.
So sell them to someone who can turn waste
into wealth.What if no buyer wants some of the
routes – especially the loss making
long-haul routes?
If the government really feels it needs
an airline to fly to Timbuktu, put it out
to tender. But why does it want wasteful
routes? What inconvenience is it trying to
avoid? Anyone can fly anywhere. At best
they spare indulged passengers the trivial
inconvenience of a connecting flight. I
keep asking people: why all this fuss made
about direct flights? Who these days has
direct flights? Apart from very busy routes,
most people who fly go through hubs with
connections. That’s the norm.Yet people prefer nonstop flights.
A few pretentious elites, perhaps, who
should not be indulged by diverting spendingWHY SA A IS LIKE THE OPER A -
AND WHY IT SHOULD BE LIQUIDATED.
Leon Louw is the CEO of the Free Market Foundation.
Guy Leitch finds out why he thinks SAA should be liquidated.