Amid growing discontent over the latest bail-out for South African Airways, questions have been raised about the benefits of maintaining a national airline.
“The problem today is the airline destroys more wealth than it produces,” says James Peron, president of the Moorfield Storey Institute, an independent think tank. “Any business that is losing money, regardless of ownership, is destroying wealth. It is not contributing to GDP but taking away from it.”
SAA faces a R4.8-billion loss for 2016/17 (and a cumulative loss since 2012 of R15.8 billion). Where could that money come from? It comes from taxpayers, both consumers and producers. For consumers, the extra taxes government raises to fund SAA leaves them with less to spend on other products, says Peron.
“As for the jobs SAA creates, what makes the supporters of SAA assume those jobs will disappear? If SAA disappeared overnight there would be a period of adjustment but other airlines would step in and fill the gap – they would profit in doing so. That sort of collapse, however, becomes more and more likely the greater the debt SAA incurs. The more that debt damages the financial rating of the country, the more the collapse of SAA will bring down along with that of just one airline.
“If SAA were to be sold to a private competitor, it is unlikely we would see much decline at all and many of the consequences of collapse could be avoided.”
With SAA out of the market, we are more likely to see more robust competition and lower air fares, which would benefit passengers directly and increase trade and tourism by lowering prices, in his view.
“It is a myth that government can create jobs by subsidising losing enterprises. Every rand’s worth of employment created on one side of the ledger comes with a rand’s worth of taxes and the unemployment it creates on the other side. Worse yet, the jobs governments tend to create are high paying in comparison to the jobs destroyed, resulting in an increase in gross unemployment.
“Redistributing wealth does not create new wealth, just as distributing jobs does not create more jobs.”
