Tough decisions need to be made to turn South African Airways (SAA) into a viable airline.
Public Enterprises Deputy Minister Phumulo Masualle said this in the National Assembly participating in a debate on the strike at the national carrier.
The debate took place soon after the airline and unions reached an agreement to end the crippling week-long strike. The strike, which saw many SAA flights grounded leaving passengers in limbo, ended when parties reached a wage deal of 5.9% against a demand of an eight percent salary increase.
“The department believes recovery of the airline is possible and can be achieved within the parameters of fiscal support already on the table. This will require a determined, concerted effort across the board. This, of course, can ensure jobs are reserved to the extent that is necessary.
“This requires we act together and it is true that tough decisions need to be made. As we do so, it should be that everyone who matters and ultimately the public, is taken into confidence about measures taken to conclude this matter so we have a viable airline,” Masualle said.
SAA faced with headwinds
Masualle acknowledged SAA has been financially and operationally challenged for many years – both as a result of external and internal challenges.
He said globally, the aviation industry is characterised by thin margins, even among the best performing airlines in the world.
“Compounding the challenge are high costs relative to revenue, inefficiencies, low productivity and poor management decisions, which contributed to the multiplicity of the challenges the airline has.”
Masualle said it was undeniable for the airline to compete effectively – and cease being a drain on the fiscus – it is imperative SAA should be turned around and made fit for purpose.
SAA has reviewed its turn-around strategy
Masualle said during the year, SAA reviewed and updated its turnaround strategy to take account of the challenging external competitive environment, as well as progress in implementation of the strategy.
Firstly, the airline obtained approval for the lease of four A350-900 aircraft to be utilised on long-haul routes, including Frankfurt and Hong Kong, which are expected to reduce fuel usage and maintenance costs and boost revenues.
The old fleet was, according to Masualle, fuel guzzlers and costly to maintain.
Secondly, the airline concluded its organisational redesign exercise, aimed at streamlining operational and decision-making processes and improving productivity.
“It also initiated the mandated consultation process to give effect to the redesign. Invoking the provisions of the Labour Relations Act, in pursuit of the restructuring, has been introduced to the stakeholder community in the airline,” Masualle said.
The airline also reviewed contracts with its top 20 vendors – the so-called evergreen contracts – the airline committed to.
The 20 vendors collectively account for just over half of the company’s total spend. The airline is implementing initiatives to reduce costs.
“Thus far, over R500 million has been saved in these efforts. In addition, it has reformed procurement processes to strengthen governance and eliminate corruption. A new CEO has been appointed at SAA Technical and other key positions are being filled.
“Procurement issues are being addressed and the airline is ensuring compliance with the regulatory requirements of the Civil Aviation Authority,” said Masualle.