Picture: GETTY IMAGES
Picture: GETTY IMAGES

There is a saying: “The definition of insanity is doing the same thing over and over and expecting different results.” It’s often attributed to Albert Einstein, but he isn’t the one who said it. It isn’t the definition of insanity either — but it does describe a trait we could call crazy.

Our species tends to repeat past mistakes hoping our “good intentions” will be enough to change the results — this time. It also describes government policy with regards to SAA. Every few months the same thing is done as was done before, even though the results from the last round were as unsuccessful as the results from the round before that.

SAA, begging bowl in hand, comes to the government asking for bailouts. Politicians line up to explain why the faltering airline should be allowed to reach into the pockets of taxpayers yet again, while SAA officials solemnly promise that, this time, things will be different. Then, a few months later, it starts all over again — the only change being that SAA’s debts grows along with the size of the bailouts.

Yet what can only be described as one massive, financial disaster is not how the partisan supporters of SAA see things. Consider SAA supporter President Cyril Ramaphosa: “Here is the reality — SAA is laden with debt right now, as we speak, it is laden with debt for a whole number of reasons … If you were to say today ‘Sell SAA’, we would not be able to get any value for it.” His solution is to keep doing what we’ve done so far, which has only resulted in larger and larger debt.

Each day the cumulative debt of SAA grows and, in political logic, it means another bailout is more urgently needed. To avoid paying debts the government argues it must go further into debt. That’s like ending famine by confiscating food.

The solution to unpayable debt is not more debt. SAA CEO Vuyani Jarana reported that as of March 31 the airline had just R13bn in assets and R26bn in debts. Four months later he said debt had increased by another R2bn, without any increased asset value. Jarana estimated total debt for the financial year would increase by another R6bn.

SAA has consumed R30bn in wealth to date and wants more. That’s R30bn that can’t be used for proper government functions such as crime fighting. That’s R30bn taxpayers no longer have to feed their families, put a roof over their heads, or educate their children. That’s R30bn in jobs destroyed in the prosperous sectors of the economy to prop up a relatively small number of jobs at SAA. It is estimated SAA will require yet another R21bn over the next three years. Yet Ramaphosa argues that unless taxpayers are put on the hook for R21bn in additional debt, they will have to repay current SAA debts of R22bn.

All this assumes that this time the bailouts will miraculously work the magic that failed to materialise from previous ones. But if history is any indication — and it usually is — the cumulative debt in three years’ time will be greater and politicians of the future will be lamenting how yet another bailout is necessary to prevent the much larger debt from immediately coming due.

Each day the cumulative debt of SAA grows and, in political logic, it means another bailout is more urgently needed. To avoid paying debts the government argues it must go further into debt. That’s like ending famine by confiscating food.

Mboweni is on the money

Finance minister Tito Mboweni got it right when he said SAA “is loss making, it’s unlikely to sort out the situation … we should close it down”. Taxpayers were told SAA creates jobs because of tourism and trade, yet SAA has been cutting flights and ending services and has promised to cut even more. Public enterprises minister Pravin Gordhan said the airline will not open new routes,  and it doesn’t have the funds. So, what has been happening as SAA cuts routes?

One thing we discovered is that markets work — competitors are increasing their services to cover the very routes SAA abandoned. While the state-owned airline fails, private competitors such as British Airways (BA) and Lufthansa are increasing the number of seats on their airlines. Instead of doing so at taxpayers’ expense, they also happen to be taxpayers. In 2012, SAA cancelled direct flights between Cape Town and London because it couldn’t make a profit. BA happily took on the route at a profit. During summer, it flows twice daily between Heathrow and Cape Town, with additional flights going into London Gatwick.

As SAA shrinks SA isn’t losing tourism. Instead, competitors are stepping in with larger planes and the amount of tourism has increased! SAA is actually hampering tourism

It has also added direct flights between Durban and Heathrow. Lufthansa and its affiliated airlines now offer direct flights from Cape Town to Frankfurt, Munich, Vienna and Zurich.

Even the lucrative Johannesburg-London route is showing SAA falling further and further behind, with BA adding flights: it now has 18 a week. SAA planes have a maximum of 1,743 seats per week to London; BA flies larger planes with room for 7,422 passengers, four times what SAA is capable of doing.

The reality is, as SAA shrinks SA isn’t losing tourism. Instead, competitors are stepping in with larger planes and the amount of tourism has increased!

SAA is actually hampering tourism with its smaller planes and less frequent flights. Even its once thriving market in regional African flights is suffering. When SAA cut off Cape Town, insisting passengers fly first to Johannesburg, Cape tourism attracted flights from Air Botswana, Airlink, Kenya Airways, Rwandair, Air Namibia, Air Mauritius and others. SAA’s failures have not led to the death of tourism at all. It has opened up slots for better-managed airlines to fill the gap and grow tourism.

Ramaphosa asks whether SA can afford to close SAA when the evidence suggests he should be asking whether SA can afford not to close it.

• Peron is president of the US-based Moorfield Storey Institute and author of several books, including Exploding Population Myths and The Liberal Tide.