NASTASSIA ARENDSE: From today SAA has effectively surrendered the bulk of the group’s domestic flights between Johannesburg and Durban, and a third of those between Johannesburg and Cape Town, to low-cost subsidiary Mango. In a statement, the airline said that the airlines will rationalise their route network for improved efficiencies and optimal aircraft utilisation, through a revised airline brand schedule.
For more I spoke to Tlali Tlali, who is the media relations manager at SAA.
TLALI TLALI: The changes need to be understood in the context of a decision taken at the corporate level to rationalise our existing resources in order to bring more efficiencies, if you like, from a group perspective. So we’ve decided to take advantage of what we have and put it to better use. And this is informed by a number of considerations.
These include customer segmentation in order to offer a much more suitable product, based on an appreciation of our market in which we operate.
Secondly we looked at the demand and load factors. That means that the decision that we take to deploy a certain number of flights per day, per week, must also be based on the manner in which certain routes perform.
The third consideration was taking note of market dynamics. We applied our mind and took note of the changed market conditions in the context of competition and the resultant effect in the form of route profitability.
NASTASSIA ARENDSE: Based on that, what are some of the changes that you’ve initiated?
TLALI TLALI: The changes that we have initiated really have less to do with the fact that we have removed capacity. They have more to do with a decision to say that we need to be able to continue to serve the market. In other words, the changes that we are talking about do not affect negatively our offering in terms of the flights that we have always had in the context of the group.
As we indicated in the statement that we issued some time last year, we indicated that from a group perspective we will continue to offer 278 flights between Johannesburg and Cape Town as a group, and we will continue to offer 200 flights between Johannesburg and Durban in the context of a group. The difference was only in the number of flights that will be operated by SAA, as opposed to the number of flights that will be operated by Mango.
NASTASSIA ARENDSE: I think in December a lot of us were leaving and going on holiday, and some were grabbed with Steinhoff and various other things that were happening in the economy. For those who may have missed your announcement, just briefly talk to me about how many flights will Mango be operating and how many flights will you be operating.
TLALI TLALI: SAA will be operating a total of 162 flights a week between Johannesburg and Cape Town, and will be operating a total of 68 flights between Johannesburg and Durban, while Mango will be operating 116 flights between Johannesburg and Cape Town as well as 132 flights between Johannesburg and Durban.
Our offering from a flight perspective remains the same. As I indicated earlier on, one of the factors that we took into account was to say let’s have proper customer segmentation in order to understand the needs of our customers in the domestic market and deploy the right type of equipment. In this instance we are saying take note of the fact that some of your customers are the ones who are price-sensitive and you need to be able to respond to that and not exit the market or hurt the market or frustrate your customers, but make use of your existing resources in order to respond to that particular demand.
But, beyond that, we also took note of the fact that competition has changed the landscape, if you like. We have more and more LCCs coming into the market – that is your low-cost carriers that are playing in the domestic market – and SAA, which is a full-service carrier has a different kind of offering. So we had to make a call: whether we maintain the same capacity, the same offering, at the same price – which will not make commercial sense – or we make changes by introducing an appropriate product which is an LCC in our stable, which will be Mango, and continue to compete in the same way as other LCC operators that have now come into the domestic market.
NASTASSIA ARENDSE: I remember in November new CEO Vuyani Jarana mentioned that SAA would be meeting at the time with domestic lenders to negotiate some refinancing. How are those discussions going?
TLALI TLALI: The issue around refinancing is a matter that we’ve handled between the company and the shareholder, and it is part of the public record now that the matter has received attention by the shareholder and a number of engagements are in place. And I think sometime last year the minister also, representing the shareholder, made an announcement about the capital injection that the airline was receiving.