Editor’s Note: June 03, 2019

What to do with South African Airways?

South African Airways CEO Vuyani Jarana has resigned less than two years after taking the job, blaming a lack of government commitment for undermining a turnaround strategy for the loss-making carrier.

His departure is likely to reignite debate about what to do with the troubled airline. The company hasn’t made a profit since 2012, and repeated bailouts have failed to stabilize its finances. 

This has led to calls for it to be shut down, including from finance minister Tito Mboweni. President Cyril Ramaphosa has so far rejected the idea, saying that the cost of closing down the airline poses a threat to fiscal stability.

He may not have a choice.

Ramaphosa is under growing pressure to deliver on promises to revive South Africa’s sluggish economy following mismanagement under his predecessor Jacob Zuma.

A central part of this is dealing with troubled state-owned enterprises. His government is already under fire for pumping $4.9bn into power utility Eskom, a move the central bank has warnedposes a risk to the country’s already battered credit rating.

Fresh off his first election victory scrutiny of economic policy is particularly intense. Under the circumstances pouring more money into South African Airways – the company needs an estimated $1.5bn to break even by 2021 – is unlikely to go down well.

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