SAA to restructure

7 Jun 2007 by business traveller

South African Airways (SAA) has announced that it will eliminate routes, ground planes and cut staff in a bid to regain profitability.

Says the airline's chief executive Khaya Ngqula, "Our cost structure has moved out of line with our competitors. SAA must overhaul its entire business if it wants to survive."

The first move sees SAA drop its Johannesburg to Paris CDG route next October. The Paris route, operated by a single daily Airbus A340-300 with older-style premium seating, is finding it hard to compete with Air France's twice daily B777 services which tend to have the latest in-flight products.

This will be followed by the axing of services from Johannesburg to Zurich and, possibly, from Cape Town to Frankfurt. However SAA will add a new route to Munich.

SAA will continue to operate its three daily flights into Heathrow (two from Johannesburg with B747s, one from Cape Town with an A340-600) but the Johannesburg flights will be switched to Airbus A340s.

SAA's existing Airbus A340s (plus another three A340s which are being returned from a Jet Airways' lease) will take over all its long distance flights as the carrier's five B747s are being grounded to cut costs.

According to Ngqula, "SAA's African operations were the most profitable and contributed £35 million (R500 million) to the bottom line last year. Domestic operations raised £7 million (R100 million) while international operations lost £42 million (R600 million)."

SAA's claims its Johannesburg-London route alone loses many millions of pounds a year. Many travellers would find this hard to believe seeing as the carrier's flights on this route are always full in both classes.

But critics believe SAA's loss-making international performance is down to poor aircraft utilisation. Instead of turning round its London flights in a few hours (as do other long distance airlines) SAA's three planes spend 12 to 14 hours marooned on the tarmac.

Besides the cost of Heathrow parking (if BAA charges £40 a day to park your car, imagine what it must charge to park a B747) the planes' depreciation over this period must also be costly. And it's a pattern repeated at other airports in Europe and Asia.

Another drawback faced by SAA is that its home country is remote from the world's great airline routings. Unlike European or Asian airlines, for example, SAA cannot top up its earnings by carrying 'beyond' passengers.

The restructuring will take place between now and next year. SAA's Ngqula hopes the carrier will be back to profit by 2010.

Report by Alex McWhirter

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