It had disappeared from our skies altogether in September
2020, having fallen victim not just to Covid but also another disease that has
plagued some other state-run carriers - corruption and mismanagement.
It may be on the verge of a sale that would see a private
consortium take a majority share in the business.
However, its handling of finances has recently come in for
severe criticism by the country's public spending watchdog.
In a scathing report, Auditor-General Tsakani Maluleke said
that the financial statements SAA had drawn up dating from the 2018-19
financial year lacked credibility. The airline recorded losses in the four
years from 2018 of a staggering $1.2bn (£1bn).
But interim chief executive officer (CEO) John Lamola said
this did not reflect the current position of the airline, which is under new
management.
He said the situation had improved in the most recent
financial year, with the airline now "running on financial resources
generated from its own operations".
Towards the end of last year, in a sign that SAA wants to be
a major player again, it reopened its routes from Cape Town and Johannesburg to
São Paulo, Brazil. And now it is selling tickets for flights to Perth,
Australia.
These are the airline's first long-haul destinations in
three years. It did return in September 2021, making a surprise profit serving
a limited number of African destinations after coming out of voluntary business
rescue.
This was a process which saw the airline placed under the
temporary supervision of experts who were asked to return the company to
financial health. They pared back the fleet from 44 aircraft to six and focused
on the African market.
Now it is aiming further afield.
"The choice of São Paulo was as a result of a very
meticulous economic and market research analysis," Mr Lamola told the BBC.
He added that the intercontinental flights hoped to enhance
trade and tourism ties between the two countries as members of Brics - an
expanding group of emerging economies originally comprising Brazil, Russia,
India, China and South Africa.
Prior to the Covid pandemic, SAA operated five other
intercontinental routes from Johannesburg to destinations including New York
and Hong Kong.
That route encapsulates the prestige that used to accompany
the airline. Once the largest in Africa, SAA faced profound challenges in the
last decade.
"South African Airways notoriously has gone through a
process in South Africa called 'state capture ', where there are well-recorded
incidents of corruption that characterised the life of the airline," said
Mr Lamola, adding that investigations were ongoing.
An official inquiry into state capture released at the
beginning of 2022 showed that the airline had been wracked by corruption
between 2012 and 2017.
As a result of the mismanagement, SAA was forced to rely
entirely on government financial assistance over a 10-year period to stay
afloat, a situation made worse by Covid.
"In that period… the government had to put in some 40bn
rand ($2.2bn) into SAA," said Public Enterprises Minister Pravin Gordhan.
It had been run at a loss since 2011.
The national carrier was placed under voluntary business
rescue in 2019 to protect it from bankruptcy.
SAA sell-off plan
It was then forced to suspend all operations in September
2020, as it struggled to raise a bailout of over $540m.
As part of a programme to rescue the airline, the government
announced plans, in June 2021, to sell a 51% stake in SAA to a group known as
the Takatso Consortium.
Under the scheme, the government's department of public
enterprises retains the remaining 49% stake, securing a long-term national
strategic interest in the airline.
Last July, it was approved by the Competition Tribunal of
South Africa provided that certain conditions were met.
One of the requirements was a moratorium on staff cuts that
guarantees job security for SAA employees during the transitional phase.
But it has hit problems, with trade unions alleging that
proper procedures were not followed. A parliamentary committee plans to
subpoena Mr Gordhan to investigate this further.
Takatso, with its huge cash injection, had been seen as a
lifeline for SAA, but the airline says it will carry on with its expansion
plans in the meantime.
SAA's new management hopes to shift the business from its
dependence on state support to a financially self-sustaining one, by only
maintaining a fleet it can afford and pulling out of the low-cost market.
"This airline must be able to survive on operational
efficiencies," said Mr Lamola.
These include choosing routes for commercial rather than
political reasons, building a fleet with appropriate long-haul aircraft and
matching expansion with the pace of the post-Covid recovery in the global
aviation industry.
Aviation analyst and founder of online publication Airspace
Africa, Derek Nseko, told the BBC that "this is a much more sensible South
African Airways and there is a lot of confidence to be gained from some of the
measures that they have taken since the business rescue process ended".
Despite the fanfare around the return of SAA to
intercontinental travel, the airline is still looking to build up its business
within Africa, taking on 15 extra regional routes, along with four domestic
ones by March 2025.
"We are focused on generating many alliances. We have
code shares with, for instance, Kenya Airways and other airlines on the
continent, where we are working together to stimulate air travel in
Africa," Mr Lamola said.
Referring to the clearance of historical debts, Mr Gordhan
said that "all the muck has been cleared out, and the state has taken
responsibility for that… to get operations that we see currently getting off
the ground".
Many will be keen to see whether SAA will "rise from
the ashes of state capture like a phoenix".
But it will be tough.
"African airlines are still being projected to make a
loss this year," with airlines such as Air Zimbabwe also undergoing
restructuring, analyst Mr Nseko told the BBC.
Nevertheless, Ethiopian Airlines and EgyptAir have both said
they have had a profitable year.
Ethiopian Airlines, which is state-owned, offers a
successful model that SAA could follow.
It has diversified its operations, including cargo,
maintenance, repair and training services to create multiple revenue streams.
It has also focused on connecting regional destinations and
capitalising on demand for intra-African travel.
This strategy has helped the airline become one of the
largest and most profitable in Africa.
Turbulence ahead
But high operating costs made worse by rising inflation and
currency devaluation threaten the ability of African carriers such as SAA to
run profitably, as financiers and those prepared to lease aircraft see the
African market as a risk.
Additionally, inconsistent and complex regulatory frameworks
in different African countries have been barriers of entry for airlines and
investors on the continent.
The African Union's Single African Air Transport Market has
tried to create a unified air transport market on the continent, but it remains
a work in progress.
However, SAA boss Mr Lamola argues that businesses must also
step up and create solutions.
"I think we have made a mistake of expecting the
political authorities in our various countries to solve these problems. But
really, they are business problems," he said.
"We need more aviation entrepreneurship in Africa,
where innovative means have to be found. We need more concrete interventions of
entrepreneurs who will be able to go out there and innovate on issues around
financing."
While SAA's new business strategy offers a promising future,
the skies ahead will not be free of turbulence.
"The African aviation landscape is extremely difficult
and the jury is still out on what the future looks like for South African
Airways," said Mr Nseko.
0 comments:
Post a Comment