South African Airways cancels flights in fight for survival

South African Airways (SAA) has cancelled more than 20 domestic flights between its Johannesburg hub and Cape Town and Durban this week, and 10 international flights to and from Munich, the airline said on Tuesday, as it fights for its survival.

SAA is running short of cash after the government failed to provide 2 billion rand ($137 million) of emergency funding it promised when the airline entered a form of bankruptcy protection last month.

The state-owned airline said it was "consolidating flights to match capacity and demand" and would consider further schedule changes over the coming days.

"These cancellations represent a responsible strategy to conserve cash," SAA said in a statement, adding it was working to accommodate affected customers on other flights.

SAA is one of several South African state entities, including power company Eskom, mired in financial crisis after nearly a decade of mismanagement.

The state companies' financial problems are seen as one of the biggest threats to Africa's most industrialised economy and have helped push the country's credit rating to the brink of junk status.

SAA's statement showed cancellations on the domestic and Munich routes started on Monday and lasted until Friday.

SAA said changes to the Cape Town route were because it had been operating training flights on recently-acquired Airbus 350-900 aircraft, which had temporarily resulted in surplus capacity.

Regarding the Munich cancellations, it said it was company policy to review flights with low demand.

FUNDING IMPASSE

The airline's business rescue practitioners have held several rounds of talks with the government in recent days on the promised funding, but they have failed to reach a breakthrough, according to a person briefed on the talks.

On Sunday, the public enterprises ministry said it was still talking with the National Treasury to raise funds for SAA.

Last week, a trade union official said SAA might have to suspend some flights and delay salary payments if the government didn't come up with a plan to provide the 2 billion rand soon.

Two other unions said on Tuesday they thought the government was deliberately sabotaging rescue efforts by not providing the funds.

The government's treatment of SAA and whether it is willing to sacrifice jobs will send a signal ahead of a much bigger battle with unions over Eskom, which is struggling to keep the lights on and drowning in debt.

South Africa's biggest opposition party, the Democratic Alliance, said on Tuesday that SAA should be liquidated as the government couldn't afford to keep it afloat.

($1 = 14.5682 rand)

By Alexander Winning