SAA ready to overcome challenges

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With the global airline industry going through a rough patch, during which many airlines, including practically all local players, have taken strain, it is not surprising that so much has happened, been said and written about SAA in the past few months.

Yet despite the challenging times it has faced, the national airline continues to play its key and unique roles to the benefit of the South African and regional economies. SAA has proved to be a resilient airline that has been built over the years by dedicated and highly skilled individuals who have ensured that operations run smoothly and efficiently through adverse economic conditions and a tough operational landscape.

However, a fact that some commentators often ignore, intentionally or not, when they talk about SAA is that it functions in an extremely competitive international environment, at great distance from many of its important markets. The competitive market and the unique difficult trading conditions that affect the local aviation industry are reflected in the decision of several major carriers that have exited South Africa in recent years.

My own sense is that such considerations by major global airlines clearly underline the reality that South Africa’s needs cannot be served reliably by commercial carriers alone. Our country needs a strong and successful national airline that contributes to the economic growth of the republic.

A recent study conducted by Oxford Economics amply illustrated the importance of SAA to the local economy. For example, SAA directly employs about 9 000 people in South Africa, while sustaining about 18 000 more jobs through its supply chain. This is substantial by any measure.

A reality that is often downplayed is the fact that SAA is an enabler of local and regional economic growth. So, as South Africans continue to debate the role of the national airline, we must be mindful of the contribution that it is making to the South African and regional economies, and of the fact that the debate is indeed a complex one. To that extent, an oversimplified and emotive approach to the discourse, such as advancing the argument that merely privatising the airline will be the panacea to SAA’s challenges, is unhelpful.

The reality is that airlines around the world are facing difficult challenges. Some of these are specific to certain airlines, regions and markets.

I will unpack our own challenges, but for now I would like to point out that overall, SAA continues to be an airline of substantial scale and influence. SAA is ranked 33rd globally by revenue; 48th by passenger capacity; and 48th in cargo carried (source: International Air Transport Association, World Airline Traffic Statistics 55th Edition, 2011).

Clearly, SAA would not be doing so well if there was no need for its strategic services or if it was not operating on a key and fundamental business basis. We cannot run away from the fact that there is a need for SAA to continue to transport people and goods safely, reliably and efficiently – a prerequisite for growing the SA economy and realising the country’s global aspirations.

In this regard, the new technocratic board, which I chair, is working hard with the shareholder and other stakeholders to, among other things, come up with a new long-term strategy, further energise the airline, rejuvenate its executive management team, strengthen internal controls, and maximise the airline’s profitability while managing costs – with the ultimate goal of positioning the carrier to play a growing role on the continent and within the framework of the Brics (Brazil, Russia, India, China and South Africa) countries.

The shareholder views expressed during the recently held AGM on the state of the airline amount to an expression of concern, and must be understood to be a fresh call on the management to respond to present-day aviation challenges in a more meaningful way. The management at SAA is prepared to see this challenge through.

SAA needs to continue investing in its own future if it is to achieve both its commercial mandate of running a sustainable, profitable business, and its inherent developmental mandate of improving economic linkages between South Africa and the rest of the world. As an example, the airline needs to place fleet orders sooner rather than later. This will ensure that it has the right aircraft to respond more aggressively to competitors while at the same time meeting the demands and expectations of those it must serve.

Other challenges that SAA has to contend with include rising fuel prices and rising user charges, levies and taxes, including airport, air navigation services, weather forecasting, passenger departure taxes, environmental/ carbon taxes and tourism levies at many airports internationally. There is also increasing competition, particularly from Middle Eastern airlines which enjoy support from their governments via fuel pricing and infrastructure investment.

Added to these are the inherent geographical advantages enjoyed by Middle Eastern and other airlines operating from the so-called mid-hemisphere hubs. Geographical advantages allow our competitors to easily access almost any major market.

Despite these challenges, SAA continues to discharge its mandate. Notably, although the airline’s fuel bill rose by R2.2bn in the past financial year to April – owing to escalating jet fuel prices – the airline’s yield has improved by 17 percent this year, with sold seats up 2 percent and fleet utilisation up 4 percent. Compliments by passengers on SAA’s service and performance have risen by 10 percent, complaints are down by 13 percent, along with an 8 percent decline in the number of misdirected and misplaced bags.

SAA continues to adhere to global standards of excellence as set out by key stakeholders such as the SA Civil Aviation Authority, the International Civil Aviation Organisation, the International Air Transport Association (Iata) and Star Alliance. SAA recently won the authoritative Skytrax awards as the Best Airline in Africa (for 10 consecutive years) and the title for Best Airline Staff Service in Africa (for three successive years). These are regarded as the highest quality approval an airline can receive and are voted for by customers in a global survey.

This year SAA grew its network across Africa by adding seven new destinations. SAA now offers direct connections from Joburg to 26 cities in 21 African countries. We should be able to increase these numbers.

All the airline’s achievements notwithstanding, much remains to be done to get the airline to its optimum operating capacity. There is a need for SAA to build on what the previous board and management achieved during their tenure and devise and implement a new strategic response.

The new business plan will be ready for submission by the end of January.

Last month, Iata confirmed that African aviation supports 6.7 million high-quality jobs and business activity totalling some $67.8billion. Let’s keep this in mind and support aviation as a catalyst for African growth as this industry has the ability to unlock and develop Africa’s economy.

 

l Vuyisile Kona is chairman of SAA.



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