South African Airways: Troubled airline returns to intercontinental travel

  • By Jewel Kiriungi
  • BBC Information, Johannesburg

Picture supply, Getty Pictures

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In 2011, the airline marked the arrival of latest planes however its fleet has now been pared again

South African Airways – as soon as a large of African aviation – is again within the intercontinental market, however there are nonetheless doubts about its monetary viability.

It had disappeared from our skies altogether in September 2020, having fallen sufferer not simply to Covid but additionally one other illness that has plagued another state-run carriers – corruption and mismanagement.

It might be on the verge of a sale that might see a personal consortium take a majority share within the enterprise.

Nonetheless, its dealing with of funds has just lately are available for extreme criticism by the nation’s public spending watchdog.

In a scathing report, Auditor-Common Tsakani Maluleke mentioned that the monetary statements SAA had drawn up relationship from the 2018-19 monetary yr lacked credibility. The airline recorded losses within the 4 years from 2018 of a staggering $1.2bn (£1bn).

However interim chief govt officer (CEO) John Lamola mentioned this didn’t replicate the present place of the airline, which is underneath new administration.

He mentioned the state of affairs had improved in the newest monetary yr, with the airline now “working on monetary assets generated from its personal operations”.

In the direction of the top of final yr, in an indication that SAA desires to be a significant participant once more, it reopened its routes from Cape City and Johannesburg to São Paulo, Brazil. And now it’s promoting tickets for flights to Perth, Australia.

These are the airline’s first long-haul locations in three years. It did return in September 2021, making a shock revenue serving a restricted variety of African locations after popping out of voluntary enterprise rescue.

This was a course of which noticed the airline positioned underneath the momentary supervision of consultants who had been requested to return the corporate to monetary well being. They pared again the fleet from 44 plane to 6 and targeted on the African market.

Picture supply, Getty Pictures

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After resuming short-haul flights, SAA has been celebrating milestones together with the airline’s first black African feminine flight crew First Officer Refilwe Moreetsi (L) and Captain Annabel Vundla

Now it’s aiming additional afield.

“The selection of São Paulo was because of a really meticulous financial and market analysis evaluation,” Mr Lamola advised the BBC.

He added that the intercontinental flights hoped to boost commerce and tourism ties between the 2 international locations as members of Brics – an increasing group of rising economies initially comprising Brazil, Russia, India, China and South Africa.

Previous to the Covid pandemic, SAA operated 5 different intercontinental routes from Johannesburg to locations together with New York and Hong Kong.

That route encapsulates the status that used to accompany the airline. As soon as the biggest in Africa, SAA confronted profound challenges within the final decade.

“South African Airways notoriously has gone by a course of in South Africa referred to as ‘state seize ‘, the place there are well-recorded incidents of corruption that characterised the lifetime of the airline,” mentioned Mr Lamola, including that investigations had been ongoing.

An official inquiry into state seize launched originally of 2022 confirmed that the airline had been wracked by corruption between 2012 and 2017.

Because of the mismanagement, SAA was pressured to rely totally on authorities monetary help over a 10-year interval to remain afloat, a state of affairs made worse by Covid.

“In that interval… the federal government needed to put in some 40bn rand ($2.2bn) into SAA,” mentioned Public Enterprises Minister Pravin Gordhan.

It had been run at a loss since 2011.

The nationwide service was positioned underneath voluntary enterprise rescue in 2019 to guard it from chapter.

It was then pressured to droop all operations in September 2020, because it struggled to boost a bailout of over $540m.

As a part of a programme to rescue the airline, the federal government introduced plans, in June 2021, to promote a 51% stake in SAA to a gaggle generally known as the Takatso Consortium.

Below the scheme, the federal government’s division of public enterprises retains the remaining 49% stake, securing a long-term nationwide strategic curiosity within the airline.

Final July, it was authorised by the Competitors Tribunal of South Africa supplied that sure circumstances had been met.

One of many necessities was a moratorium on employees cuts that ensures job safety for SAA staff throughout the transitional section.

However it has hit issues, with commerce unions alleging that correct procedures weren’t adopted. A parliamentary committee plans to subpoena Mr Gordhan to research this additional.

Takatso, with its enormous money injection, had been seen as a lifeline for SAA, however the airline says it is going to stick with it with its growth plans within the meantime.

SAA’s new administration hopes to shift the enterprise from its dependence on state assist to a financially self-sustaining one, by solely sustaining a fleet it will probably afford and pulling out of the low-cost market.

“This airline should be capable to survive on operational efficiencies,” mentioned Mr Lamola.

These embody selecting routes for business quite than political causes, constructing a fleet with applicable long-haul plane and matching growth with the tempo of the post-Covid restoration within the international aviation business.

Picture supply, Getty Pictures

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SAA desires the airline’s title to be again on departure boards internationally

Aviation analyst and founding father of on-line publication Airspace Africa, Derek Nseko, advised the BBC that “this can be a far more wise South African Airways and there’s a lot of confidence to be gained from a few of the measures that they’ve taken because the enterprise rescue course of ended”.

Regardless of the fanfare across the return of SAA to intercontinental journey, the airline continues to be seeking to construct up its enterprise inside Africa, taking over 15 further regional routes, together with 4 home ones by March 2025.

“We’re targeted on producing many alliances. We’ve code shares with, as an illustration, Kenya Airways and different airways on the continent, the place we’re working collectively to stimulate air journey in Africa,” Mr Lamola mentioned.

Referring to the clearance of historic money owed, Mr Gordhan mentioned that “all of the muck has been cleared out, and the state has taken accountability for that… to get operations that we see presently getting off the bottom”.

Many will probably be eager to see whether or not SAA will “rise from the ashes of state seize like a phoenix”.

“African airways are nonetheless being projected to make a loss this yr,” with airways akin to Air Zimbabwe additionally present process restructuring, analyst Mr Nseko advised the BBC.

Nonetheless, Ethiopian Airways and EgyptAir have each mentioned they’ve had a worthwhile yr.

Ethiopian Airways, which is state-owned, gives a profitable mannequin that SAA might comply with.

It has diversified its operations, together with cargo, upkeep, restore and coaching companies to create a number of income streams.

It has additionally targeted on connecting regional locations and capitalising on demand for intra-African journey.

This technique has helped the airline develop into one of many largest and most worthwhile in Africa.

Turbulence forward

However excessive working prices made worse by rising inflation and foreign money devaluation threaten the flexibility of African carriers akin to SAA to run profitably, as financiers and people ready to lease plane see the African market as a danger.

Moreover, inconsistent and sophisticated regulatory frameworks in several African international locations have been limitations of entry for airways and traders on the continent.

The African Union’s Single African Air Transport Market has tried to create a unified air transport market on the continent, nevertheless it stays a piece in progress.

Nonetheless, SAA boss Mr Lamola argues that companies should additionally step up and create options.

“I believe now we have made a mistake of anticipating the political authorities in our varied international locations to unravel these issues. However actually, they’re enterprise issues,” he mentioned.

“We’d like extra aviation entrepreneurship in Africa, the place progressive means must be discovered. We’d like extra concrete interventions of entrepreneurs who will be capable to go on the market and innovate on points round financing.”

Whereas SAA’s new enterprise technique gives a promising future, the skies forward won’t be freed from turbulence.

“The African aviation panorama is extraordinarily tough and the jury continues to be out on what the longer term seems like for South African Airways,” mentioned Mr Nseko.

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