South African Airways (SAA) is in dire straits. The airline is technically insolvent and therefore guilty of reckless trading, according to a leaked memo dated Nov. 6, made public by the media in December. SAA is legally obliged to file for liquidation or business rescue, Andrew Barlow wrote in a column in PoliticsWeb.

Barlow is a researcher at the Helen Suzman Foundation, a non-partisan think tank dedicated to promoting liberal democratic values and human rights in post-apartheid South Africa.

Citigroup withdrew a 250 million rand ($15 million USD) financing facility on Dec. 24, leaving SAA without cash, prompting National Treasury intervention.

Many say the fact that SAA is a state-owned enterprise is the basis for its spectacular failure. Such reasoning is understandable in a South African context. The government seems effective at undermining the efficacy of its parastatals. Whole areas of major cities go without electricity for hours at a time; the postal service is neither trusted nor competent and buying water in a shop is sometimes more reliable than turning on a tap.

But such reasoning is also incorrect. SAA’s failure is a result of management, not state ownership.

Ethiopian Airlines (EA) is currently the fastest growing, most profitable and largest African airline.  Since 2005, it grew an average of 20-to-25 percent per year, according to AirCargoWorld. Its profits for the 2014-2015 fiscal year were $175 million, more than all other African airlines combined.

Ethiopian Airlines has been state-owned since the 1940s at the behest of Emperor Haile Sellasie. Government oversight is much the same as South African Airways through political appointments to the board of directors. The current chairman is the deputy prime minister, and several other board members are leading government figures; including the minister of transport and the minister of mines. The remaining members are politically connected to some extent. The same story is often told about SAA, so how can this be reconciled with Ethiopian Airlines’ success?

Firstly, the Ethiopian government, in their capacity as owners, and the board of directors, in their capacity as representatives of the owners, prioritised hiring professional management staff on merit rather than political placements motivated by patronage and cronyism.

The current management team has over 421 years of airline industry experience between them, according to AviationNews. The CEO, Tewolde Gebremariam, began working for EA in 1985 in the cargo traffic handling department. He worked his way up gradually until becoming CEO. He has since won multiple awards including African CEO of the Year 2012 from the African CEO Forumand The Best Africa Business Leader from the Washington D.C based Corporate Council on Africa, according to global airline network StarAlliance.

Secondly, the Ethiopian government, as owners, and the board, as their representatives, then allowed the management team, in their capacity as the professionals, to run the company on sound business principles. The government and board know that this is a company and it has to be operated on commercial considerations, said Henok Teferra Shawl, vice president for strategy and alliances at Ethiopian Airlines in an interview in TheAfricaReport.

The diligent, experienced and reliable management team are trusted by the shareholder and given the autonomy to act without concern for political interference or fear of political reprisal. At the same time, and like any business, they are also made aware of their accountability – which is judged purely on performance, not partisan objectives.

For example, Ethiopian civil servants do not receive free tickets. Quite a contrast to South Africa, where civil servants continue to receive a quota of free flights for themselves and family even after leaving public office. Further, Ethiopian Airlines employs the industry average number of staff needed on board each flight whereas SAA employs twice that number, according to a report in FinancialMail.

All this reflects the fact that Ethiopian Airlines, in contrast to South African Airways, is not considered an opportunity for patronage, rent seeking and clientelism. Though state owned, it is, first and foremost, a business. Because it is managed like this, it is able to raise its own debt, finance its own development, expand, grow, and turn a profit – all without recourse to public subsidies. In fact, it currently pays dividends to the government. It is exactly how a state owned enterprise can, and should, be run.

The lessons for SAA’s shareholder — the government — are manifold and yet straightforward and easy to implement.

An entirely new SAA board should be appointed with a mandate to operate along business lines, using Ethiopian Airlines as a model. The senior management team should be strengthened by the appointment of people with industry experience who can develop the strategic vision to take the airline forward as a business. Then allow the managers the freedom to do their jobs.  It’s that simple.

Read more at PoliticsWeb.