Story ID: PSSsaa05192015
South African Airways Charts Road to Recovery
By: Peter Shaw-Smith
Caption: Decision pending on privatization versus recapitalization
Word Count: 468
South African Airways (SAA) has emerged more optimistic from a 90-day action plan that started in December, despite the paring of long-haul routes necessary to ensure survival.

“Competing with the Gulf airlines is not getting any easier, and we are operating out of a 5,500-foot airport  [at OR Tambo International in Johannesburg], which affects us on long continental routes,” Sandy Bayne, head of SAA flight operations, told AIN on the sidelines of Aviation Africa 2015 in Dubai May 10.

“In terms of leisure traffic, it’s going to be very difficult for any airline in the world to compete with Gulf carriers. You have to [create a] niche [for] yourself, define yourself. There is a market for point-to-point carriers, where the yield is good. My personal opinion is the days of an airline such as South African going head-to-head with a Gulf carrier are gone. They really are.”

The airline scrapped unprofitable routes to Beijing and Mumbai in March, and it expects losses again for the latest financial year. Overall, the financial picture has looked bleak, as the rand’s weakness against the U.S. dollar undercut any prospect of profitability. Indeed, the airline has endured an uphill struggle over the past decade, as it has seen Ethiopian Airlines take over as operator of the continent’s largest fleet with more than 70 aircraft, while low cost carriers continue to supress yields in southern Africa. Acting CEO Nico Bezuidenhout, appointed in 2013 after his tenure at low-cost Mango, has brought a measure of stability, however.

The airline’s current strategy centers on fleet optimization, following an order for 20 A320s from Airbus in 2010. Bayne said efforts had gotten under way to convert a now remaining 10 A320s into five A330s. “That decision should be made shortly,” he said. “The A330 does very well for us in Africa.”

The airline depends on government loan guarantees to allow it to venture into the marketplace for equipment. “That has to be solved. We are paying interest on two fronts,” Bayne added. “We need to be made public or capitalized in some other form by our shareholder, at the moment, the government. I think that decision is going to be made very shortly.”

Bayne echoed criticism that the government has not handled the situation well. “It's really about the government, as shareholder, defining the difference between ownership and management,” he said. “Being an owner doesn’t mean you can manage.”

Nevertheless, Bayne struck an upbeat tone when asked about a possible recovery. “The confusion is hopefully coming to an end. The big thing is long-term finance. Department of Treasury turnaround times are very quick. We've seen a real commitment from everyone involved to turn this thing around,” he concluded.