South African Airways and Alitalia on brink of collapse

The future is uncertain for South African Airways. Photo / Getty Images

Two of the world's major national airlines have hurtled closer to the possibility of going bust after a difficult weekend that's left both with even more uncertain futures.

Italy's flag carrier Alitalia and South African Airways, which flies to Perth, have been haemorrhaging money for years but a series of fresh blows have raised concerns of collapse for both.

On Friday, the South African arm of Flight Centre announced it would no longer sell tickets for South African Airways flights due a lack of faith in its future, while Alitalia, which has struggled for years with money woes, is in limbo again this week after a rescue plan fell through.

Now the airlines, both former symbols of national pride for both their respective countries, may be the latest flag carriers to crumble in the wake of low-cost competition, rising fuel prices and global economic uncertainty.

Hundreds of flights were cancelled during a week-long protest by South African Airways workers. Photo /Themba Hadebe, AP

And they risk joining a long list of airlines that went belly-up in 2019, including the UK's Thomas Cook and Flybmi, Iceland's WOW and India's Jet Airways.

'RISK TOO SIGNIFICANT'

Government-owned South African Airlines (SAA) and its lenders are in the midst of "intense conversations" today over how to fund the struggling national airline.

The carrier, the second-largest in Africa behind Ethiopian Airlines, hasn't made a profit since 2011 and has been handed $5.75 billion in bailouts since 1994.

It came close to being brought to its knees last month during a crippling week-long staff strike against planned job cuts that led to hundreds of flights being cancelled.

South Africa's Flight Centre Travel Group, one of the largest travel agents in the country, said its preferred travel insurer Travel Insurance Consultants and its underwriter, Santam, were

no longer willing to cover SAA due to "doubts concerning the long-term viability of the airline", AFP reported.

"The risk associated with SAA's going-concern status has been an issue for many years, however in light of recent events, the risk is now considered to be too significant by reinsurers to continue cover for new ticket sales," Flight Centre said in a statement to its customers.

The airline has been unable to pay staff their full salaries this month and need a loan of two billion rand, or about $200 million, to stay afloat until March next year.

Today the South African government ministry overseeing SAA said the airline would not be able to continue in its present form and needed "radical restructuring" to stay afloat.

"Over the past few days there have been intense discussions with lenders to secure the necessary funds to cover the operational and structural transition over the next few months," the ministry said.

SAA employs more than 5000 workers and its fleet of more than 50 aircraft fly to more than 35 domestic and international destinations, including Perth. It previously cut its flights to Sydney and Melbourne.

ALITALIA's $650M LIFELINE

Meanwhile Alitalia, which is also burning through cash, hit a major snag after a consortium of potential buyers failed to make an offer before a deadline last week, prompting the Italian government to approve a 400 million euro ($650 million) bailout to keep the airline afloat for another six months.

Alitalia airlines has declared bancruptcy twice in the past 11 years. Photo / Miguel Angel Sanz

Alitalia has been under special administration since 2017 and struggled for years with financial difficulty due to competition from low-cost rivals and Middle Eastern airlines, and the rising cost of fuel.

There was hope in a consortium of potential buyers including the company Atlantia, which operates Rome's airports, along with Italy's state railway operator, the Italian treasury and US airline Delta Air Lines. But their plans fell through last week.

"It's evident that right now a business solution doesn't exist," Italian economy minister Stefano Patuanelli said at a Senate commission, Reuters reported.

On Monday Italy's government approved a 400 million euro ($650 million) bridge loan to Alitalia that introduces "urgent measures" to assure the airline's operations through to May.

But the loan risks breaking European Commission rules. The European Commision is already investigating whether a government bailout of $1.46 billion to Alitalia in 2017 could be considered state aid, which is regulated by the European Union to prevent unfair competition.

Alitalia lost $112.2 million in 2011, $455.3 million in 2012 and $943 million in 2014, Reuters reported.

The Italian Association for the Rights of Consumers and Users criticised the money the government has invested in the flailing airline.

"The abnormality about Alitalia is that it loses money when it flies," the group said in a statement on Thursday.

"With the money wasted on Alitalia, the government could have bought six airlines, namely Air France, KLM, Turkish Airlines, Norwegian, Finnair and SAS."

Meanwhile, unions have planned a December 13 strike amid concerns over Alitalia future and any threats to jobs.