Profitability ‘on the horizon’ – SAA


The acting CEO of South African Airways, Nico Bezuidenhout, sees profitability as being “on the horizon” for the troubled national carrier, with business as usual until the airline’s turnaround strategy is approved.

One of the measures South African Airways (SAA) is taking to ensure healthy operations is to expand its route network. Etihad and SAA this morning announced that SAA will codeshare on 12 Etihad Airways flights to Abu Dhabi and beyond. Etihad Airways will have access to ten cities in South Africa and the African continent.

The Memorandum of Understanding signed this morning also involves inter-airline services and the possibility of joint procurement, training and maintenance.

The first phase of the agreement will see the ‘SA’ code placed on Etihad Airways flights between Johannesburg and Abu Dhabi, as well as on flights to 12 cities on Etihad Airways’ worldwide network that includes destinations in the Middle East, and South America. Additional cities in the Middle East, Asia and India will be added as the necessary approvals are secured.

Etihad Airways will place its ‘EY’ code on South African Airways’ flights from Johannesburg to Cape Town, Durban, East London and Port Elizabeth, as well as to Livingston, Lusaka, Ndola, Harare, and Victoria Falls. Outside the African continent Etihad Airways will place its code on South African Airways flights to Sao Paulo.

The agreement also makes provision for passengers to earn and redeem miles through the airlines’ frequent flyer programmes.

Dudu Myeni, SAA’s acting Chairperson, said: “This partnership provides SAA customers with vital, instantaneous, and seamless access to 12 key destinations in the Middle East and beyond. It will also broaden SAA’s network through alliances and strategic partnerships, which, is our long term view.”

James Hogan, Etihad Airways’ President and Chief Executive Officer, pointed out that Africa was exhibiting some of the highest air traffic growth rates in the world and that participation in Africa was critical to Ethihad.
“This strategy, of working closely with partner airlines to serve secondary cities in a market, has been highly successful for Etihad Airways around the world and we look forward to build upon our already strong relationship with the team at South African Airways to extend our footprint in the strategically critical African market,” Hogan said. “We believe we can build a global airline through partnerships.”

Bezuidenhout noted that the aviation industry is characterised by many challenges, such as cost increases and changes in consumer behaviour. For this reason, he said, continued growth is an imperative. Consequently, SAA is growing its network, fleet and code shares. The 12 new destinations with Etihad add to its 26 destinations in Africa while new more efficient aircraft will be added to the fleet – in the future, Etihad and SAA may combine purchasing power to buy aircraft together. “If you can combine purchasing power you will get a better deal,” Bezuidenhout said.

SAA will receive two new Airbus A320s in June and another two in July as per existing orders, while another 16 will be delivered by 2017. This will ensure that the 17 Boeing 737-800s operated by SAA and the four Boeing 737-800s operated by SAA low-cost subsidiary Mango will eventually be replaced by the A320s.

Tlali Tlali, Executive: Group Corporate Affairs at SAA said the code share agreement announced today was part of SAA’s turnaround strategy. Bezuidenhout said the turnaround strategy was delivered on April 2 and that SAA is engaging various stakeholders on it before it passes to Cabinet for approval. In the meantime, it’s “business as usual in the interim, such as expanding route networks.”

Bezuidenhout said that regarding profitability, the airline has managed to save hundreds of millions of rands and that “we are seeing some green shoots,” with profitability on the horizon.

This week it emerged that SAA has borrowed R1.5 billion as working capital to keep operations running until Cabinet adopts the airline’s turnaround plans. SAA used a R5 billion state guarantee extended to it last year to secure the loan.