The increased participation of the state in the commercial aviation industry benefits the flying public and aids the state in adjusting to geopolitical shifts. As the industry reaches cruising altitude and the turbulence caused by the vagaries of COVID-19 subside, role-players are now well-positioned to reflect on the impact of state-owned airlines in South Africa.

In its June 2024 assessment of the international commercial aviation industry, the International Air Transport Association (“IATA”) records:

“Thanks to solid and persistent demand for air transportation, our industry can now turn the page on the Covid-pandemic. Traffic has caught up with 2019 levels, and profitability has returned to the industry. To be sure, this is a laudable feat. While the trend is will in all probability stay positive regarding both growth in activity and profitability, the pace of improvement is likely to slow. “

Recent developments in state-owned airlines

South African Airways (“SAA”) is the last state-owned carrier following the closure of SA Express and Mango Airlines. Despite the positive strides made by SAA on several fronts, there are concerns from private airlines regarding its rescue and ongoing success. However, the success of SAA and the expansion of state ownership efforts are crucial to the South African story.

The overarching mandate of any state entity is to serve the public. The extent of this imperative differentiates state actors from private actors in any commercial endeavour. This principle holds true for the state's involvement in the commercial aviation industry. Similarly, the commercial aviation industry is vital in facilitating social, economic, and cultural development both globally and nationally by enhancing mobility and connectivity. Accordingly, the potential of the commercial aviation industry, in tandem with the mandate of state entities, presents a significant opportunity to democratize air travel in South Africa. The state has a vested interest in increasing access to travel, as several governmental departments seek to improve both domestic and international tourism. Airlines are significant contributors to this effort.

Socio-political role of state-owned airlines

In South Africa, democratizing access to all industries is crucial. As such, it is important to reflect on the loss of black talent following the closure of Mango and SA Express, as well as the downsizing of SAA. These developments have significantly reduced opportunities for newly qualified black cockpit and cabin crews to enter the industry. SA Express, in particular, played a key role as a feeder for black pilots into SAA. While driving transformation should be a collective effort, there is increased pressure on the state to take the lead. This is reinforced by legislation, industry charters, and regulatory measures aimed at advancing transformation and empowerment. However, the rate of transformation and empowerment continues to be a sore point, characterized by a sluggish rate of uptake and resistance from several entities. It was only in 2019 that SAA reported its first-ever black and only female aircraft maintenance engineer assuming a technical role within the organization, in the same vein, it is only in 2022 when two black female pilots made history at SAA by becoming the first to fly and operate a flight from Johannesburg to Cape Town solo in the organization's 88-year existence . As dismal as that may be, similar success is yet to be reported by private carriers.

Shortcomings of state-owned airlines

The popular narrative that state involvement in commercial aviation is inherently not in the best interests of the flying public is not entirely accurate. The focus should be on efficient governance and well-resourced, competent state involvement. State-owned airlines have always had a market to service and a valid business case. The real issues have been corruption and mismanagement, not a lack of demand. It would be irresponsible for the state to not take responsibility for these issues and present a new approach as they undertake to obtain much-needed capital to ensure sustainable resumption and expansion of operations. Not doing so would be to throw out the baby with the bathwater, as these state-owned airlines provided much-needed socio-economic contributions.

Besides being a feeder in terms of crew and passengers to SAA, SA Express also connected tier-2 and tier-3 cities to main hubs such as Johannesburg, Cape Town, and Durban. These routes, not operated by private companies, were kept affordable by state-owned airlines, which is no longer the case. Higher prices on these routes counter the imperative to increase flight access, affecting people from previously disadvantaged backgrounds most. Mango pioneered new channels of access for low-income communities harnessing the ubiquitous retail stores as sales points, making air travel more accessible.

At this crucial juncture in the sector's development and trajectory, strong and robust state involvement is essential as a practical measure to prioritize and ensure the safe, secure, and sustainable growth of both local and international air transport. This approach is not merely a matter of patriotism but a step towards democratizing historically opaque and monopolised aspects of the aviation sector. While state involvement is not a ‘fix all’, the state holds a significant accountability mandate to the people of a democratic country. Accordingly, as the upwards trajectory of certain parts of the industry maintains momentum, the state is charged with providing a set of broader considerations, which involves the interests of the flying public and the aviation value chain participants.

Socio-economic role of state-owned airlines

The increased participation of the state in the commercial aviation industry becomes even more important in light of the uncertain times brought on by the new Republican Administration in the United States, coupled with the responses to an uncertain trade environment. South Africa, like many other countries, must cultivate new markets for products that had traditionally found buyers in the West.

State’s role in adapting to geopolitical changes

Efficient state participation in the commercial aviation industry, as seen in jurisdictions such as India, highlights the benefits of intentional resource allocation and political will in adjusting to current geopolitical patterns. Government initiatives have improved airport facilities, enhancing both passenger experience and operational efficiency. An example is the Ude Desh ka Aam Naagrik (“UDAN”) scheme, which aims to make air travel more affordable and accessible by improving regional connectivity. This initiative has led to the creation of new airports and the renovation of existing ones, especially in tier-2 and tier-3 cities. Route development of this nature in South Africa, through partnerships with private commercial airline participants, would benefit the flying public.

Accordingly, it is imperative that the state leads proactive steps to a fast-changing geopolitical landscape. The changes in global markets have caused increased market activity that is East and South facing. South Africa occupies a unique geopolitical position in this regard and air connections form an important part of its ability to adjust to these changes. Therefore, the South African government should invest in extending SAA's international network beyond the current two destinations Perth and São Paulo. This is not a new reality for the state carrier given that, its peak in 2003 to 2020, the international network represented almost 70% of the airline's turnover.

In order to understand the importance of SAA international route network for South Africa, one needs to engage African business people that find their ability to reach new markets on the continent constrained by the logistics of air travel, due to large distances between business centres and the cost of travel as international airline groups dictate route networks and cost of travel. Similarly, this would align with liberalization of movement of people and goods as the status quo is an impediment to the aspiration of African Continental Free Trade Agreement (“AfCTA”) of boosting intracontinental trade from the current dismal 15-18% of total African trade. As several jurisdictions on the African continent gear themselves to create a more interconnected trade environment, state involvement in the sector plays a crucial role in the public good of the flying public. South Africa and Africa should disabuse themselves of the dominant voices that want to reduce the state to being a policy maker and regulator in the sector.

Authored by Kgathatso Tlhakudi (Public Policy Executive), Bwanika Lwanga (Attorney) and Luxolo Tomsana (Candidate Attorney).