Turbulent times for SA commercial airline industry
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OPINION: One of the key hurdles that a number of airlines face is that as a country, we are simply unable to create a conducive and practical corridor for connectivity to other continents, writes Phuthego Mojapele.
On August 26, 1929, South Africa launched its first commercial airline under Union Airways Company (Pty) with the first flight travelling between Maitland and Port Elizabeth.
Onboard included five bags of mail.
Then, on April 24, 1976, Union Airways, which had now rebranded to South African Airways, operated the world’s first commercial flight utilising a Boeing 747SP.
The aircraft flew on the Johannesburg-Lisbon-Rome-Athens.
For any airline to be successful, a number of factors ought to be considered. These include geographic location and good inter-connectivity policies.
Increased inter-connectivity within global airline markets has over the years marked the commercial airline industry with a distinct dynamism - both in an external environment as well as internal operations of any airline.
This dynamism indicates how the highly sensitive industry has, over time, grappled with challenges of product innovation by suppliers, intense competition from strategic alliances, bankruptcy protection and increased costs of labour, fuel and security measures.
In 1993, most companies around the world reported that there was a clear indication that the industry had lost huge amounts of money in the past few years, and it has never made a sustained, substantial return on investment, particularly for legacy carriers.
And South Africa’s commercial industry has not been spared.
It has, over the past couple of years, found itself in a chaotic state. It is therefore worth reflecting on what has gone wrong over the years with models used to apply for airlines in the country.
Take the now-defunct Nationwide Airlines, for instance. The airline operated as a privately owned business that started well in 1995 with 800 employees operating charter services within Africa for the UN. The airline kicked off its domestic operations in December that year.
In 2003, it made its debut intercontinental service with the wide-body Boeing 767-300ER. But in November 2007, a Nationwide Airlines Boeing 737-200, with the registration ZS-OEZ and which operated flight 723, lost its right engine a few seconds after take-off.
The aircraft was scheduled to leave Cape Town and was en route to Johannesburg. And so was the beginning of the demise of Nationwide Airlines. Its liquidation proceedings already kicked off in May 2008. Seven months later, the Boeing aircraft went under the hammer at an auction.
Another airline that recorded similar misfortunes was 1Time - the first low-cost airline that operated between 2004 and 2012. 1time operated domestic and regional flights. Its main base was at OR Tambo International Airport. In November 2012, the airline went into liquidation and ceased operations.
Despite various initiatives and interventions to keep it afloat, including those of a liquidator, its operations remain suspended. This is in addition to the business rescue practitioner at the time advising the company that there were no reasonable prospects of survival.
The airline soon filed for liquidation, cancelling all flights and leaving hundreds of passengers stranded after a final meeting with shareholders. The airline’s last flight was at 3pm on the day of its liquidation.
Not forgetting that in 2011, then minister of transport Sibusiso Ndebele, to much fanfare, announced the launch of an airline by the SA National Taxi Council, Santaco, which never materialised. Reasons for its failure to take-off are still unknown today.
There were other airlines such as Sky Velvet that came and left, while others stayed for a year or two. But the bottom line is that none conquered, showing that the airline business is not child’s play.
Back then, fuel costs had been a thorny issue for most of these airlines - a challenge the industry still battles with today.
It’s no secret that South Africa is at the southern tip of Africa and one of the key hurdles that a number of airlines face is that as a country, we are simply unable to create a conducive and practical corridor for connectivity to other continents.
This renders it difficult for any international airline operating in South Africa to break even.
As a result, the industry will take much longer to recover from these tribulations.
To further paint the uncertainty of operating in such a complex industry, Comair also suffered the same blow. But instead of remaining permanently grounded, the aviation company elected to go through with a voluntary business rescue.
Business rescue practitioners hope that Kulula and British Airways aircraft will now return to the skies by September, or by December at the latest.
With the emergence of the Covid-19 pandemic and the continued lockdown regulations which have seen many businesses go under, any new airline planning to enter the commercial market would be embarking on a suicide mission and entering uncharted waters. This is because issues facing our airlines cannot be resolved overnight.
It will take time, if not years, for the industry to recover and operate on the same standard as industries in Europe and North America.
Now Mango and SAA find themselves in a similar situation. The only way for an airline to survive is to get the business protection in place.
One of the key factors we should have implemented a long time ago as a country was to support the industry by developing a policy that will protect the operators that would like to enter the market.
At this stage, there is no investor who would risk investing in any airline business because of the issues that face the industry.
The pandemic has had an enormous impact on the aviation industry, affecting passenger traffic, air cargo demand, airport workforce and incoming revenues.
Business travel will also take longer to recover, and even then we estimate it will only likely recover to around 80% of pre-pandemic levels by 2024.
Remote work and other flexible working arrangements are likely to remain post-pandemic and people will take fewer corporate trips.
* Mojapele is an independent aviation analyst.
** The views expressed here are not necessarily those of IOL.