Busting the myth that SAA is ‘necessary’ for tourism

The writing has been on the wall for the airline since 2016 …
Tourists visiting SA have other options – and have been using them. Image: Shutterstock

We are told over and over by those in power (or in charge) that South African Airways (SAA) “has a specific and important role to play as an enabler for tourism and a driver of economic growth through trade” (former acting CEO Nico Bezuidenhout speaking in 2015).

The ANC’s highest decision-making body, the national executive committee, decreed last month that SAA “should be retained as a national airline”.

Even the business rescue practitioners have in recent weeks stated – as fact – that “SAA is a key strategic asset which needs to be positioned to provide reliable connectivity to markets within South Africa, the African continent as well as servicing selected international routes”.

But is it really?

What is not in question is the critical role tourism plays in our economy.

SAA’s role in that, however, is not as vital as government makes it out to be.

South Africa welcomes between 200 000 and 300 000 foreign arrivals by air per month. In 2018 (the last available full-year statistics from Statistics SA), 3.1 million foreign visitors arrived at our airports, with 2.4 million of those arriving from markets outside of Africa.

The state-owned airline’s long-haul routes (post-February) will comprise London, Frankfurt, New York, Perth, and Washington via Accra. The last of these ought to really be treated as a regional one with an onward routing to the US.

Assuming 320 seats per flight at a somewhat generous load factor of 80% (256), the four remaining SAA long-haul flights (again, excluding Washington via Accra) could ferry as many as 373 760 passengers into the country per year. However, not all on board will be foreigners. With the exception of the Frankfurt route, there are likely equal numbers of foreign visitors and returning South Africans on each flight. So potentially 200 000 of these arriving passengers will be foreigners, and an even smaller number actually tourists.

The canned routes (Munich, Hong Kong and São Paulo … Guangzhou can’t really be counted as it was only introduced last month) presumably had far worse load factors as they were reportedly not profitable. At a 60% load factor, these three routes would’ve landed 179 712 passengers in SA in 2018. Again, using a 50/50 split for foreigners versus returning citizens, you’d arrive at 90 000 visitors (and a smaller number of tourists).

Remember, of course, that SAA does not fly international routes to either Cape Town or Durban. Of the 3.1 million total number, nearly one million (964 844) inbound foreign travellers did not fly SAA as they landed in (mostly) Cape Town (905 000 of them).

The straw man argument is that we’ve ‘lost’ these tourists. This assumes that they would abandon plans to visit. Save for São Paulo, however, there are other options. There is a direct flight to Hong Kong (and practically a direct flight via Singapore) while visitors from Munich are easily able to route through Frankfurt.

The Middle East carriers in particular have been very successful at routing passengers from all over the world to and from South Africa. At last count, Emirates operated 56 return flights to and from Johannesburg, Cape Town and Durban.

From March, SAA will operate 35 a week (daily flights to the five remaining long-haul destinations).

The fact is that foreign visitor numbers are growing in spite of SAA, not because of it.

The airline has been competing, if one can call it that, from a position of weakness and rivals have chipped away at its supply to the point of it becoming unsustainable.

Read: Rivals are strangling SAA’s long-haul business

This is what happens in well-functioning markets. Airlines are allowed to compete, and compete they have.

At the end of 2017, in its much-delayed 2016 annual report, SAA cautioned that: “The Cape Town-Johannesburg route, which is the largest connecting point in SAA’s network, experienced significant challenges from local and international operators. Increased capacity deployed by LCCs [low-cost carriers] and additional capacity from international operators eroded demand on the Durban route, which was the best performing domestic route in the previous year. However, since late 2015, significant additional capacity from international markets was diverted to these subsidiary gateways resulting in the bypassing of our main hub, OR Tambo International Airport.”

And: “The London route remains extremely competitive with major airlines from other regions making a beeline to serve the entire SADC region via Johannesburg. Some of these operators have also commenced operations to Cape Town thereby bypassing our hub at OR Tambo International Airport.”

This competition hasn’t just strangled SAA’s long-haul business, it has seriously impacted its domestic and regional routes as well (a story for another day).

The Cape Town Air Access initiative has been most effective at breaking the SAA-via-Johannesburg monopoly.

Since its inception in 2015, it has helped land 15 new routes and 21 route expansions. It notes that “during this period, more than 750 000 inbound seats were added to its international network”, with around 1.5 million additional passengers between 2015 and 2018.

Along with the previous ‘staples’ of Dubai, Germany, London, France and the Netherlands, there are now direct flights from Cape Town to the US, Hong Kong, Singapore and regional flights to Ethiopia, Kenya, Rwanda, and Zambia.

This growth has meant that the international terminal in Cape Town will “soon reach capacity”, necessitating a R2.8 billion investment by Acsa (Airports Company South Africa) to build a second terminal.

In Durban, a similar story is playing out with the Durban Direct route development initiative. It has secured six new routes, the most recent being a direct flight to London three days a week.

Both of these programmes are examples of what is possible when government agencies actually put in some effort and bureaucrats are forced out of the way.

Minister of Mineral Resources and Energy Gwede Mantashe was right when he said the national carrier should be shut down if it cannot sustain itself.

And there are an awful number of smart politicians (surely including our president and minister of public enterprises) who know deep down that SAA is not “necessary” for tourism or a “strategic” asset.

Maybe sanity will prevail?

 

Listen to Nompu Siziba’s interview with transport economist Dr Joachim Vermooten:
 

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I said this before, clip the birds’ wings, cause he ain’t flying anymore… SAA will probably end up flying to all Communist countries to carry the hundreds of foreign commie flyers to and fro SA, i.e. China, Russia, Cuba, Palestine, etc. Most expensive airline in Africa and worst service. As a taxpayer, I no longer want to participate in this ponzi scheme… The average ANC voter will most probably never fly SAA, poor souls. Love live SAL

…..SAA can cling on by improving service period

For example …Singapore Air stewards are always on hand, you never wait long to be offered a blanket, snacks, drinks while other passengers sleep

Singapore Air stewards regularly disinfect snd clean toilets

The same for Qatar and Emirates, Cathay, Ethiopian and Air France, carriers I have recently flown on

Lastly the quality of the stewards. SAA stewards look rough, mostly obese, often rude, constantly indifferent to assistance ….in all quite scary and nauseating

Singapore, Thai (not recent) and Qatar tops with Ethiopian 2nd

… then fly those airlines and stop whinging.

We want solutions for our country, not kicking it when it’s down.

Oh I do. I will fly to London on Emirates if BA flights are full.
We also want solutions for SA. Trying to save SAA by throwing more billions down a black hole is not a solution. It is madness.

I don’t care what u do…. I’ll never fly saa again.

I look at it as my little private protest against corruption.
Lol.. I sometimes pay slightly more on some routes just so saa doesn’t get a seat from me. Lol
I don’t think I’m the only one.

You cannot be a world player when you are based on the edge of the world. Let the other centrally based airlines ferry to the central hubs and let Safair etc fill the gaps here.

Maybe not a world player, but you can still pull-off being a well-run, profitable national air carrier.

Take Air New Zealand for example. Talk about being on the edge of the world, yet they are one of the most innovative, well run airlines.

Sure of course. In the ideal world… What do we have that new Zealand doesn’t have…….

Actually ANZ Zealand had to be bailed out by the NZ Government in 2001. Then the NZ Government got smart, they brought in experts sorted it out and sold it on for a handsome profit.

That’s sounds more of a solution…
The only trick is that the world is spherical, it has no edge, no corner and no end…

Tha ANC MPs want to keep loss making SAA open for their free flights and irregular tenders like LA Vie de Luc water etc.

Actually, the real reason why the ANC won’t/can’t shut SAA down is because of the multitude of SOE financing cross guarantees that would be triggered and the house of cards will come crashing down

Good point, although I don’t think that most ANC cadres think that strategically.

#strategically, think again, this criminal enterprise, acting as a political party, has survived for the last 25 years, despite the minority making some noises.

Sadly, sanity is in short supply when it concerns SOEs. SAA serves no purpose, it’s services are readily replaceable by commercial airlines run for profit and not as a vanity project. Rather spend the money on roads, houses, hospitals, schools, water treatment plants, renewable energy – the list goes on. All of them enable improved, sustainable economic development more effectively than anything SAA can do.

Rename the Thing “Cadre Airlines” : Its an embarrasment to a once proud airline !

Interestingly, although Sao Paulo was announced as a route to be terminated from end-February you can still book round trips to Sao Paulo on FlySAA.com and other travel booking sites for March. So perhaps the long awaited rescue plan will include more destinations than previously announced?
Still, agree on the irrelevance of SAA to the local market. Technical, food, lounges and Mango are all that should be rescued.

Political rhetoric…..use history as a true yard stock as to if South African needs –
/ can afford a national airline Think/ Check the facts on what happened with VARIG .the Brazilian “ national airline which eventually folded , after continuous “ bail outs” by government ( DeJaVu )…..interesting , once the government airline closed , private industry stepped up and at least 3 small airlines opened initially , fares dropped drastically ( called competition ) industry employment direct & indirect exploded and just look at their aviation industry. Now
Come on comrades!

This kite aint gonna fly!

A slightly off-topic observation: Is it just me, or is the SA flag on the airplane in this picture the wrong way round? Or is this some Airforce convention from 1920?

It’s correct for the right side of the aircraft, with relevance to the direction of travel. For the right side, the hoist is on the right (direction of travel) and the fly is on the left. International convention. You’ll see the same on soldiers’ uniforms.

I have to ask, does Hilton Tarrant know what a ‘direct flight’ is? and how it differs from a ‘non-stop’ flight?

As someone that does know, I found the article difficult to read.

Singapore International Airlines have direct flights from Cape Town to Singapore, these flights stop in Johannesburg.

We don’t NEED SAA, we don’t WANT SAA. Scrap it! The money can be better spent elsewhere, like keeping the lights on.

It’s difficult to see that consider that a national airline is strategically necessary. There’s no SAA flight route that cannot be replaced by another airline.

If not closed down, SAA could operate using an “Uber” model: outsource all operations to other airlines, while retaining the admin such as booking systems and marketing. Let others have the tasks of flying and technical /maintenance. For which SAA seems to no longer have the skills competence (apologies to all competent aircrews and remaining techies).

What’s “necessary for SA tourism” is a country with excellent, safe internal rail links like the EU. A hotel industry that does not gouge tourists; secure tourist venues where you can safely travel, walk and enjoy the natural assets with families and an efficient passport/entry process.

SAA is as necessary as a motor brand like Nissan, VW, Fiat, BMW or whatever. Remove one and there are many others to fill the gap.

It’s called international competition.

The SAA planes that have bewn flying around with their cabins full of emptiness, certainly didn’t prevent English supporters from attending the recent cricket fixtures.
We know that the govt is full of old fogies who constantly live in the past, but the Renaissance is well behind us and most tourist (including those English supporters) no longer arrive by boat, but by plane, just not YOUR plane!

The ANC is not interested in the detail – for election purposes they just do not want to be known as the party who destroyed the SAA.

End of comments.

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