SAA looks set to shrink in effort to survive

South African Airways cut 38 local and international flights this week, an indication of a possible downsizing of the cash-strapped national carrier to avoid total collapse.

Various trips to Cape Town, Durban and Munich from SAA’s Johannesburg hub were cancelled after the government stalled on a R2 billion ($138-million) cash injection pledged as part of a local form of bankruptcy protection.

The state-owned airline has lost money since 2012 as it grapples with high operating costs, an inefficient jet fleet, mismanagement and corruption allegations.

SAA is trying to “conserve cash and optimize the airline’s position ahead of any further capital investment,” the company said in an emailed statement, adding that further stoppages may happen in coming days.

Les Matuson and Siviwe Dongwana, who were appointed as SAA’s business rescue practitioners, are due to present a turnaround plan to creditors by Feb. 28. It’s likely to include a comprehensive restructuring of the airline’s operations – including the removal of several unprofitable routes.

SAA hasn’t published audited financial statements for the year through March 2019 because it couldn’t be sure of its status as a going concern, meaning up-do-date information of its route performance isn’t publicly available.

However, a presentation given by former chief executive officer Vuyani Jarana in February gave an indication of which flights could be rationalized or cut. Jarana quit at the end of May, and a permanent replacement hasn’t been appointed.

International

SAA’s trips to nine destinations outside of Africa historically generated just over half of flight revenue, yet the only profitable route was to Washington D.C. The biggest losses were incurred on flights to Hong Kong – which were suspended in November due to protests – and to Munich and Frankfurt.

SAA has since leased fuel-efficient Airbus A350-900 planes to use on some long-haul routes in a bid to reduce international losses.

Regional

SAA flew to 21 destinations in other African countries, and the only loss-making route was to Ethiopia, where it competes with that country’s profitable state carrier. The biggest money spinners were flights to Zimbabwe, Zambia, Mozambique and Nigeria. Regional trips generated about 30% of SAA flight revenue.

Domestic

SAA’s flights linking Johannesburg with Durban, Cape Town and East London were all profitable, but it lost money on its route to the southern city of Port Elizabeth. Local flights accounted for 17% of the carrier’s flight revenue. The company’s low-cost Mango Airlines also competes on those routes, alongside other budget rivals.


“SAA is working closely with its sister airline, Mango, to re-accommodate passengers on alternative services operated by both airlines to minimise disruptions and thereby ensure passengers reach their destination as quickly as possible,” SAA spokesperson Tlali Tlali said in a statement on Tuesday (21 January).

The following domestic flights operated by SAA have been cancelled:

Johannesburg (JNB) – Cape Town (CPT)

SA303                  Depart 0530      Arrive 0735       Dates: 20, 21 & 24 January

SA307                  Depart 0700      Arrive 0905       Dates: 21 January

Cape Town (CPT) – Johannesburg (JNB)

SA316                  Depart 0820      Arrive 1015       Dates: 20, 21 & 24 January

SA322                  Depart 0950      Arrive 1145       Dates: 21 January

Johannesburg (JNB) – Durban (DUR)

SA527                  Depart 0630      Arrive 0735       Dates: 20, 21, 22 & 23 January

SA543                  Depart 0955      Arrive 1100       Dates: 20, 21, 22 & 23 January

SA571                  Depart 1655      Arrive 1800       Dates: 20 & 21 January

Durban (DUR) – Johannesburg (JNB)

SA534                  Depart 0805      Arrive 0910       Dates: 20, 21, 22 & 23 January

SA550                  Depart 1130      Arrive 1235       Dates: 20, 21, 22 & 23 January

SA578                  Depart 1840      Arrive 1945       Dates: 20 & 21 January


On the international network, SAA is cancelling selected services between Johannesburg and Munich. SAA will re-accommodate passengers on its services between Johannesburg and Frankfurt, as well as London Heathrow.

“Some passengers travelling to Munich and others travelling via Munich to other destinations will be re-accommodated for some of their journey on partner airlines in the Star Alliance to minimise delays,” Tlali said.

The following flights have been cancelled:

Johannesburg (JNB) – Munich (MUC)

SA264                  Depart 21:15      Arrive 07:00       Dates: 20, 21, 22, 23 & 24 January

Munich (MUC) – Johannesburg (JNB)

SA265                  Depart 20:30      Arrive 08:20       Dates: 20, 21, 22, 23 & 24 January


SAA said these decisions are in line with its usual policy of reviewing flights and consolidating services with low demand.

“Furthermore, during the current process of business rescue, these cancellations represent a responsible strategy to conserve cash and optimise the airline’s position ahead of any further capital investment,” Tlali said.

SAA said consolidation on the Cape Town route is also necessary, as the airline has been operating training flights for pilots on the new state-of-the-art Airbus 350-900 aircraft on this route – before transferring the new planes to international routes.

“The introduction of these larger aircraft has resulted in temporary surplus capacity on the route. SAA will be reviewing further possible flight schedule amendments over the coming days.

“Any operational changes will be communicated to our travel trade partners and customers at the earliest opportunity and passengers will be re-accommodated on other airlines wherever possible,” said Tlali.


Read: SAA starts cancelling flights as crisis deepens

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SAA looks set to shrink in effort to survive