SA Flyer Magazine editor Guy Leitch says government needs to just bite the bullet and sell-off state-owned airlines.
SA Express is once again airborne after being grounded for three months over poor maintenance.
The airline has since lost most of its routes to competitors.
Leitch has written extensively about troubles at SA Express and SAA
He believes that current turn-around strategies won’t be any different from the ten previous failed attempts.
Getting private sector players involved in SAA will therefore take more than merely putting a stake up for sale.
As in the case of Air India, the government is unlikely to relinquish its entire stake, and any potential buyer should also expect restrictions on job cuts. SAA’s relatively new leadership team’s proposals to “hire out” pilots and cabin crew to international airlines, rather than retrench them, have already met resistance from trade unions.
The airline’s latest turnaround plan will cost R21.7bn over the next three years, with a promise from management that it will be profitable by 2022.
CEO Vuyani Jarana, a former executive at Vodacom, is so confident it will work that he has bet R100,000 of his own cash on the outcome.
Whether or not it gets an equity partner on board, the carrier’s leaders need to focus on getting the basics right. For airlines, a low-margin, high fixed-cost business, keeping your aircraft in the air as much as possible, with full-fee-paying bums on every seat, is the holy grail.
Part of SAA’s problem is that its aircraft are not flying nearly enough, with its narrow-bodied fleet, typically used for shorter distances, only flying for eight hours a day, and wide-bodied aircraft, used on international long-haul flights, in the air for only an average of 11 hours a day.
Increasing these utilisation rates will be crucial to bring SAA’s cost per available seat kilometre in line with its more successful competitors, a key performance metric for airlines.
In the 2017-18 financial year, the airline’s operating costs alone amounted to R32bn, considerably more than its total income of R29.4bn. Chief restructuring officer Peter Davies, an international expert appointed in December, has said that the cost structure will need to be cut by between 35% and 40% — R11bn to R13bn — to make SAA profitable.
That will take more than outsourcing a few pilots and cabin crew or cutting flight frequencies to London. As Davies told the Financial Mail in June: “There is room for improvement in almost everything we have looked at.”
Given the number of failed turnaround plans, the revolving door of executives and the endless bailouts over the past decade, South Africans’ scepticism that SAA can achieve success on its own is understandable. Don’t assume private investors will feel any more confident about the airline’s prospects.
Source: News24
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