Closure and restart as an option for a sustainable South African national airline

Abstract

Background: The non-implementation of certain key initiatives of South African Airways’ (SAA’s) turnaround strategy poses a risk that SAA may not recover financially.

Objectives: The establishment of SWISS (previously known as Crossair and Swiss International Air Lines) as a successor airline to Swissair’s liquidation was studied to determine the viability of closure and restart of a smaller successor state-owned airline as an alternative option to a sudden liquidation of SAA.

Method: The study is based on a literature review of analysis, official reports and financial results.

Results: Three distinct phases for the establishment of the successor airline for Swissair were identified: (1) Financial distress of the SAirGroup (Swissair’s holding company) and the factors which contributed to Swissair’s demise. (2) The transition from Swissair to SWISS. Swissair’s grounding was caused by a liquidity crunch followed the announcement of bankruptcy protection. Flight operations were restarted a few days later with financial support from both the State and the private sector. Some of Swissair’s assets, routes, staff and flight operations were transferred to a subsidiary, Crossair, as successor airline, later re-branded as SWISS. SWISS, however, continued to incur losses despite progressively reduced scale of activities and four restructuring plans. (3) As a Swiss-based national airline SWISS, which became profitable following its acquisition by Lufthansa.

Conclusion: The transformation of SWISS as successor airline to Swissair is an option to mitigate the risk of a sudden service disruption of SAA. Serious pitfalls require detailed preparation and funding before implementation. SWISS only became successful following its acquisition by Lufthansa.