Unsure exactly how SAA's cash flow works, but like most businesses I assume they have seasons, cycles of busy and slow periods. I cannot think of a worse time for the strike to happen during the business cycle than now, the reason is that Christmas is virtually upon us, one month away, people spend more during the festive season than any other time of year and for most businesses the cash flow generated during the peak months, let’s say November to February goes a long way to that great cycle of money. In other words the busy cycle helps pay off 30 day or even 60 day accounts that may be lagging, reduce bank overdrafts and/or increase a positive bank balance and that money goes to bridge the quieter periods of the business cycle, let’s say May to August.
With an airline, there will always be domestic flights that go on all year but international tourism must surely peak over the busy months as I pointed out.
Saying all this, I expect SAA's woes to happen next year some time, when they encounter the traditional slow months and have no reserves. All we need now is a massive unexpected increase in the price of aviation fuel in the next 6 months and SAA will for all intents and purposes be surely bankrupt, a hole so deep of debt.
The South African Government has a comedy of errors happening at this point of time, while they can bail out SAA, what about all the other SOE's that are in the same cash flow predicament. How long is a piece of string, in this case how much has the country got in reserves to simultaneously bail out all the SOEs. Surely without the Government itself getting a bailout from who knows where, they cannot financially support failing businesses. If this was a private listed company it would be down the drain like Group Five or Basil Read by now, shareholders will have lost everything.
In the short term Government should pay the people the 8% increase they demand, get back to business and hopefully rescue the few months of the business cycle that is upon us now. The Government can then silently retrench 100 workers here and then 100 a little later, basically take their boiling frog approach to their own people over the next year or two while putting SAA up for sale at the end of this period.
I really cannot see how any SOE will ever be profitable in South Africa with the socialist policies adopted by the ANC; they will continue to be flounder ad infinitum, dragging the country down with it.
One needs to ask President Cyril Ramaphosa one question. Would he if SAA was his own business, continue to run it like it has been. If he is open and honest his answer should be NO. The interviewer if there were such a person to ask him such a question, should then follow on with, then why are you wasting the taxpayers money, is it because it doesn’t come out of your own bank account. I think at that stage the atmosphere in the room would be rather awkward.
