Should South African Airways be privatised given the aviation deregulation policy in South Africa?
This research consists of a wide literature review on deregulation and privatisation of airline business world wide. The emphasis is on the benefits of airline privatisation. The idea was to attempt to find out whether the deregulation of South African Airways (SAA) indeed brought about the changes that are expected of a commercial concern. These changes included cost cutting strategies and charging economically efficient fares as well as abandoning unprofitable routes. Some personal contact with the SAA Public Relations Officers in Cape Town and Johannesburg was used to gather the data used in the research. The Transnet and the Competition Board annual reports were other major sources of data. The analysis was accomplished by scrutinising the SAA financial statements as to whether SAA followed all the requirements implemented when deregulation was introduced. An econometric test was used to check whether there was any improvement in capacity utilisation at SAA as was expected to happen after deregulation. The findings from this research are that SAA did introduce new measures to try to be profitable and cut costs, such as, reducing the labour force and abandoning unprofitable routes. SAA also stopped cross-subsidisation practise, whereby loss making routes were financed by profitable ones. In general SAA introduced measures that can be expected from a profit maximising firm which is under pressure to tum profits. However, these changes have not yet produced consistent results as far as profit is concerned and is supported by the econometrics test which does not support the expected hypothesis that since SAA is now operated on commercial basis, should be able to tum profits and be efficient.
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