Embattled state-owned airline SA Airways (SAA) could be profitable again, given the right changes. Photo: Karen Sandison/African News Agency (ANA)
Embattled state-owned airline SA Airways (SAA) could be profitable again, given the right changes. Photo: Karen Sandison/African News Agency (ANA)

SAA could be profitable again given the right changes – expert

By Sizwe Dlamini Time of article published Jul 14, 2020

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JOHANNESBURG – Embattled state-owned airline SA Airways (SAA) could be profitable again, given the right changes, according to Guy Leitch, aviation expert and editor of SA Flyer magazine.

Leitch, who was speaking at a webinar held on Tuesday as part of PSG’s Think Big webinar series, said the airline was bogged down with issues of poor management and corrupt procurement, and it could do with amending some of its unprofitable flight routes.

“They cannot make money east of Dubai because they can’t compete with the super connectors like Emirates or Qatar Airlines, so they should cancel all of those routes, perhaps with the exception of Perth,” he said.

Leitch said despite there being no shortage of interventions to save the national airline, creditors were getting restless and many jobs were at risk.

On Tuesday the majority of creditors voted in favour of the business rescue plan for SAA and named veteran aviation executive Philip Saunders as the interim chief executive of the beleaguered national carrier.

The Department of Public Enterprises (DPE) welcomed the vote and applauded creditors and all stakeholders for realising that a new, restructured, competitive airline, borne out of the old, was the best option to immediately take back to the skies and preserve the brand of a national carrier.

“The DPE believes that the favourable vote is a much better outcome for creditors and SAA employees than liquidation, and the government remains confident that the implementation of the business rescue plan will balance the rights and interests of all parties,” the Department said in a statement.

In supporting the plan, the government expressed its commitment to mobilising the necessary resources to fund the transition, including Voluntary Severance Packages (VSPs) agreed with the unions.

DPE director-general Kgathatso Tlhakudi said the restructuring was fundamental and will create a solid base for the emergence of a competitive, viable and sustainable national airline for the Republic of South Africa. 

“The restructuring is different from previous attempts at turning around the business. The old way of contracting for labour and services is being departed from. Productivity and efficiency will guide the performance system going forward.

“We need an SAA which will emerge from this restructuring and its subsidiaries to be attractive assets that will attract strategic equity partnerships and other business partners. This has been reflected in the approaches that Government has received from local and international investors and players.

“We believe that an example for a responsible business transformation process has been set for the South African public and private sector. The parties entered the process understanding everyone will have to give in a little to attain the bigger picture,” he said.

Tlhakudi said SAA taking to the skies was important for the country and the region to achieve the following: 

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⦁ Provision of essential air services for the repatriation of South Africans stranded in other parts of the world, and flying of critical medical supplies was made possible because we had SAA.

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⦁ We could not rely on other countries’ carriers as they were grappling with the emergency brought on by COVID19.

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⦁ The integration of the region is dependent on an effective air route network due to the large distances between our economic centres. Anyone that does business in the subcontinent can attest to this.

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⦁ The national economy is dependent on international investment and trade, and air connections are critical in ensuring that South Africa, remains on the sights of foreign investors

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⦁ We have a beautiful country that is dependent on international tourists for its viability. Further, there are many people in this sector that derive their livelihoods from people taking their time to visit our country.

Leitch said: “The air connectivity provided by SAA is essential for the South African economy in that it enables tourism and the transport of goods and services for economic enterprise. Let’s consider if there was no SAA anymore. The other airlines won’t be in a hurry to enter the South African market due to Covid-19, so this will leave a gap in air travel services for South Africa.” 

This does not only impact people coming in but affects cargo too – 80 percent of cargo by value is transported by air.

BUSINESS REPORT

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