Registered users can save articles to their personal articles list. Login here or sign up here

Rivals are strangling SAA’s long-haul business

There is simply very little reason to fly the flag carrier anymore …

Fifty-six. That’s the number of long-haul return flights operated by state-owned carrier SAA each week, with daily outbound and inbound flights between its Johannesburg base and London, New York, Washington (three via Dakar, four via Accra), São Paulo, Frankfurt, Munich, Perth and Hong Kong.

Fifty-six seems a fair amount, until you start comparing this figure to those of rival airlines. Emirates operates 56 return flights to South Africa (Johannesburg, Cape Town and Durban) a week. This summer, British Airways will operate 38 return flights a week (also to those three destinations).

This is not only a numbers game, of course. It would be far more preferable to run a truncated but full – and therefore profitable – long-haul network. Except airlines are a volume business.

And these aren’t apples-to-apples comparisons. Emirates operates an Airbus A380 on one of its four Joburg flights daily, while British Airways now flies two A380s a day between Heathrow and OR Tambo.

The planes SAA operates on its long-haul routes seat between 249 and 317 passengers. On the London route, its A330-300 seats 249. That’s 1 743 seats (to London) a week. British Airways, its direct competitor on this route, has 6 566 seats available a week, just on the twice-daily A380. Add in the 856 seats from four Boeing 787 flights a week and that totals 7 422, more than four times SAA’s capacity!

Virgin Atlantic, which is leasing SAA’s Heathrow slot, enabling it to fly twice daily from Johannesburg, offers more than double SAA’s capacity, with 3 696 seats (one way) each week.

Johannesburg to London

Return flights per week

Seats per week (one way)

British Airways

38

7 422

Virgin Atlantic

14

3 696

South African Airways

7

1 743

Gulf – and other – hub carriers have also increased frequencies and added routes at a staggering pace, mopping up demand while SAA shrinks. Aside from the 56 return Emirates flights to South Africa weekly (28 to Johannesburg, 21 to Cape Town and seven to Durban), Qatar operates 28 flights to the three cities, Turkish Airlines a further 18, Ethiopian 21 (to Joburg and Cape Town), and Kenya Airways 21 to Johannesburg (smaller Etihad only flies once daily from Johannesburg). That’s a total of 144 return flights, nearly three times SAA’s entire long-haul schedule.

It’s not just the direct competition on long-haul routes to Johannesburg that’s throttling SAA. The state-owned carrier’s long-haul strategy seems to be premised on all flights operating from Joburg.

Increasingly, rivals are flying direct to Cape Town as well as Durban, further weakening SAA’s position. During (our) summer, British Airways flies twice a day between Heathrow and Cape Town and, given the constraints around landing slots at Heathrow, has added three flights a week from Gatwick Airport in London. Last week, it started flying direct between Durban and Heathrow three times a week.

Probably the biggest mistake ever made by SAA regarding its long-haul business was selling the valuable Heathrow landing slot for its Cape Town-London flight in 2012.

With the direct options from Durban (Emirates, Qatar, British Airways and Turkish Airlines), there’s very little reason to fly overseas via Johannesburg. And from Cape Town, there’s practically no reason.

The Western Cape Government’s Cape Town Air Access initiative from 2015 via agency Wesgro has been an astonishing success. There are direct flights from Cape Town to the UK, three destinations in Germany, Switzerland, France, the Netherlands, Austria (!), Dubai, Turkey, Qatar, and Hong Kong.

These flights to/from Germany (and, from last month, Austria) mean there’s precious little reason for German tourists to fly to the Cape via Joburg. How long SAA will be able to sustain direct daily routes to both Frankfurt and Munich remains to be seen.

The new seasonal direct route to Hong Kong (Cathay Pacific) from Cape Town (three times a week between November and February) will put further pressure on SAA’s only route to the Far East.

Regional stronghold under threat

And SAA’s only real remaining stronghold – its regional flights to African destinations, where it is often the only operator – is increasingly under threat.

Wesgro has also been successful in getting African airlines to fly directly to Cape Town, with flights from Botswana (Gaborone on Air Botswana and Maun on Airlink), Zimbabwe (Victoria Falls on Airlink or Kenya Airways, and Harare on RwandAir), Zambia (Livingstone on Kenya Airways), Rwanda (Kigali on RwandAir), Angola (Luanda on TAAG), Namibia (Windhoek and Walvis Bay on Air Namibia) and Mauritius on Air Mauritius. Many of these routes are operated daily, which is surely placing some pressure on SAA’s regional load factors.

Airlink also shuttles inbound tourists between Cape Town and the Kruger National Park (Hoedspruit, Skukuza and Nelspruit). This means that tourists from Europe and Asia can fly directly to Cape Town, then to their ‘safari’ in the Kruger, Botswana or Vic Falls, then return to Cape Town to fly out.

A decade ago, often the only option to do this would be on SAA, via Johannesburg.

Government’s oft-repeated contention that SAA is strategically important and an “enabler for tourism” no longer holds water. Tourist arrivals are increasing in spite of SAA, not because of the state-owned carrier.

* Hilton Tarrant works at YFM. He can still be contacted at hilton@moneyweb.co.za.

AUTHOR PROFILE

COMMENTS   38

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

Good article Hilton , could you appear before the Parliamentary committee dealing with SAA , and paint the bigger picture for them , because clearly nobody from SAA or any government official will provide these facts for all to see.
Whilst the airline business may be a competitive industry, you dont need a rocket scientist to ascertain why an airline such as SAA is the most unprofitable of them all .

The real reason the government don’t want to give up SAA is because it is their own private airline— affordability /sustainability is clearly not the issue. Imagine all the perks such as free flights/ and voyager miles , that government ministers and ex-presidents and their families would lose should it be liquidated

Don’t they also fly first class, R100k a pop to London.

Between the Zuptas killing the India route, the Gulf states wiping their ass with SAA and its own mismanagement, SAA has allowed itself to be bullied out of long hall routes.

Yet another example of racist BEE policies. If you want a job done, put the most experienced people in place based on their capabilities NOT on the colour of their skin.
It’s a sad day that SAA has been forced to its knees purely for and by political expediency.

Could it be possible that some sneaky government official gave the landing and traffic rights to the middle eastern airlines for a cash handouts. Now, those airlines such as Emirates, Qatar, Ethiad, Ethiopian, Turkish, an a few others are selling seats to destinations much cheaper than SAA and thus SAA cannot compete with prices. A further reason is SAA’s on costs. Almost without exception, every service SAA provides such as on board meals, ground handling, cleaning, fuel, baggage handling, engineering, IT, just to name a few are costing SAA more than it does other airlines because SAA don’t buy these services direct from the supplier or do things themselves, but rather through companies set up by themselves to hyphen off a percentage being a handling charge or commission which would find its way into their or some comrades back pocket, as well as second, third and forth handlers or agents, thus allowing several levels of percentage increases in basic service costs to be paid or syphoned off before the airline gets and pays for whatever it is is being provided to them, thus making their on costs for the seat they sell to us – the public, the most expensive out of our airports. Some of the suppliers, such as fuel agents and catering supplies were set up by former SAA executives for that very purpose. Hence, SAA could never be competitive on any routes while this corruption and draining of funds was concerned. Then there is the inflated salary bills, higher then normal staff numbers, and the amount of free and discounted (ID) tickets each and every staff member gets, filling the aircraft with non revenue providing passengers. Yes, there are more ways that the money is being drained from the SAA bank accounts, but there are many which are in place and overseen by the comrades to ensure SAA is a cash cow for them. Send in the forensic auditors and do a comparison with other airlines to see the truth.

SAA is massively overstaffed and has outrageously expensive service providers.

Ergo: SAA is being treated as a cash cow by the connected cronies, and simultaneously to provide “jobs” for relatives of the cronies.

Very informative! And great work by Wesgro.

A further indicator that an independent Western Cape could be roaring success.

Ditch South Africa and become independent.

Good article, nice to see some hard data. As a regular traveller from JHB up into the continent I regularly fly SAA and their service is generally good. KQ is the only real competitor and that’s only regional in EA.

imo SAA needs to bin their intl routes and continue to grow their Africa footprint, including by utilising less of a hub and spoke model, West Africa is fertile territory as anyone who has flown Lagos-Accra will attest.

They would do well to headhunt the clever strategists at Wesgro too …..

Took the current government quite some time to work out that SAL is not a running business entity, but is only in existence thanks to taxpayer money. The days that South Africa needed its own national airways due to sanctions are long time history. SAL is currently just an empty shell but still dishing out jobs costing the taxpayer. Other question: Why is it anyhow possible for other airways to run at a profit, while SAL is at a loss and needs government guarantees to continue business? SAL management simply could not work out the basic fundamental core combination of flights it needs just to break even. Remember this one: Not so long ago and to crown it all, although it has nothing to do with SAL itself, ironically previous state president had the idea of getting an aeroplane to be used in the capacity as president whilst the SAL as national airways is financially totally bankrupt.

A pilot told me that if one steals a toothpick from British Airways, one is fired. SAA is a criminal enterprise enriching all who work there, at the taxpayers expense. There is no incentive to shut down the criminal enterprise, as long as we keep funding it

Good one Hilton. Won’t you show them where the eject button is?

The ANC are really up the creek with all the SOE’s.

They packed them full of their friends, looters and family and now have unions and legislation that does not allow them to easily fire as easily as they hired.

Well done you and your SOE’s are truly stuffed.

The ‘turnaround plan’ should consider shutting the airline and keeping the catering business, lounges and technical division. Consider offering the technical division as a merger / kickstart option to the Lufthansa Technical / Comair deal underway.
Following this route there can be some face saving on job losses and impact, the taxpayer will save money and they will give up on the impossible task of turning the airline part around. I guess they could consider keeping Mango even it isn’t burning too much – but even Comair concede they stand to make more from lounges, simulator rental etc. than actually flying domestically.

Agree concentrate on airport excellence. Give great service, booking, catering, cleaning etc.

Profitability in independent carriers is depressed because SAA is able to price irrationally because they have the lifeline of constant government “recapitalisations” and aren’t constrained by the tedious need to balance the books. This has caused many carriers to go out of business over the years because Pretoria will just write SAA another blank cheque in the name of blah blah blah…strategic enabler…blah blah blah…gateway to the continent…blah blah blah…

What seems to escape successive ministers is that these bailouts, large as they are, are nowhere near sufficient to right the listing ship. All they do is allow SAA to limp along for a little longer, bleeding taxpayers dry. To properly recapitalise SAA would mean not only writing off its mountainous past debts, but also giving it the means to retire the A340 fuel-guzzlers and modernise its fleet. The idea that any international airline worth its salt would want to enter into a “strategic partnership” as a shareholder alongside the ANC government is laughable. Although maybe Aeroflot would consider it if we would just stop being difficult and approve the nuclear deal…

Has SAA paid its debt yet to Comair in terms of that court order when Comair took it to court for unfair market practices? Wish a journalist would follow up on this issue.

I am a frequent traveller for work – and I have to say SAA is a great airline with great service, comparable to the best in the world. I will say though that I agree with Bertus below, they should drop their international routes (the São Paulo route, for example seems rarely full) and focus on Africa. SAA is really the only option for South Africans to do business in Africa. Without SAA, we would be severely impeded from doing business.

KQ and a few local African airlines might be in the up and up – but scheduling, direct flight options, quality and safety concerns are still big challenges for them to overcome. SAA is vital to our economy.

You must have looots of space on those planes, I know no-one else who touches SAA (I do take your point about Africa there and I agree with you, thats where we should be flying)

Its big in Africa, don’t forget there is alot of business, shopping and tourism into SA from other African countries. Most of the flights I have caught are packed.

If, hypothetically, SAA were to cease all regional (Africa) flights, you can be sure that other airlines, (mostly from African countries e.g. KQ, RW, Ethiopian, Namibia, also BA/Comair, Emirates, Lufthansa and Air France) would acquire those redundant SAA aircraft and the necessary crews and take up those routes as soon as they possibly could. And they would be able to fly these same routes a lot cheaper.

Hypothetical, but realistic.

Great for you but can’t say it’s fair that tax payers and the country keeps SAA going for a minority that flies to Africa. Maybe your company can buy a small plane for your travel?

You mean SAA is vital to YOU on one of its routes but detrimental to the economy!

Excellent article and this is just another tired example of why socialism/big government interference makes no sense.

Whilst SAA was focused on building BEE suppliers (Dude Myeni’s illegal interventions), hiring as many people as possible and changing CEOs as much as possible, the private players were coming up with profitable strategies and executing them effectively.

I would be interested to see a cost to income comparison of SAA relative to any other major carrier locally and internationally. My understanding is their workforce is 3 times larger whilst having significantly less passengers and therefore the old excuse that they are not profitable because they fly to certain low volumes strategic locations is only a part of the story, how large or big a part is difficult to work out.

The flaw in this argument is that the ANC, which controls SAA, is interested in running a business or serving the country, rather than helping themselves.

When it comes to transport, the ANC is only interested in subsidising themselves (free SAA flights, extending to family, Gautrain, blue light conveys) rather than ameliorating the effects of spatial apartheid by fixing railways and subsidising taxis.

The notion that airlines and airports contribute to the economy (especially via tourism and exports) is totally alien to our NDR genii.

I’ve said it before, one day soon, one of those SAA birds may very well just drop from the sky, they aren’t minibus taxis, they need strong technical people and they have all mostly left SAA. Ask Comair

JHB to Ghana R13 000 return SAA.
double debited my credit card i.e R26 000
I reversed it. cancelled flight.
emirates to Ghana R7 000 return (flight to UAE, then to Ghana).
You cant’t compete with crooks.

Hilton Tarrant:
“With the direct options from Durban (Emirates, Qatar, British Airways and Turkish Airlines), there’s very little reason to fly overseas via Johannesburg. ”

Qatar and Turkish don’t fly direct from Durban. They fly via Joburg, without 8th freedom rights. Being stuck in a plane for over an hour in Jhb, even without being allowed to disembark, is still “via”. Painfully “via”.

No, Hilton is correct with respect to his use of terminology.

A direct flight is a flight that is operated with the same aircraft, and with the same flight number — irrespective of the number of stops the aircraft may make in getting from A to B. The Qatar and Turkish flights to/from Durban meet that criteria, and are therefore direct flights: the fact that they stop to drop off or pick up more passengers and cargo in Johannesburg does not preclude the flight from being classified as a direct flight. A more famous example are flights between London and Sydney, which are direct flights but need to make a stop (usually in Singapore) for operational reasons: the plane can’t make it all the way without having to refuel.

What you’re thinking of is a “non-stop flight”, which means just that. Going back to the international flights from Durban, it would therefore be correct to state that Qatar and Turkish operate direct flights, while Emirates and British operate non-stop flights.

Hub and Spoke models aren’t quite outdated yet but there is movement towards it becoming obsolete. That’s not SAA’s major problem, all gulf carriers operate hub and spoke models, their major problem is the outdated fleet. Except 2 newish A333 everything else is outdated. The people, at the end of the day, who enables an airline to fly are pax. People would much rather fly direct than run around DBX to catch a connecting or spend 5 hours in DOH. But SAA has ancient seats, ancient IFE and no wifi. What are you to do on a 16 hour flight to NY if you don’t have entertainment and no connectivity. Its all about pax experience and that’s where the gulf carriers tops everyone especially SAA. Not to mention A340’s are no longer efficient aircraft. They were designed to compete with the 747 which is itself obsolete now.

As much as it is about the economics of it RPK etc, your economics won’t mean squat if no one wants to fly with you.

SAA has a much better business class than BA and Lufthansa, Kenya and Ethopian, on the A333s but they do not compete with Kenya and Ethiopian they compete with BA and LH, they need to undercut them in terms of prices. A filled J cabin brings double the money of a filled Y cabin. Undercut them with price. Like EK, QR Kenya and Ethiopia.
Let go of the fuel guzzlers like the 340 replace them with 350s for the longer range ops like JFK and HKG and lease 330neos to replace the 200’s. Airbus are struggling to sell those so they can get a great deal.
SAA is a sickly donkey and newer aircraft may be its antibiotics.

Oh and those who talk about “Its BEE’s fault” its an american who threw SAA in the trash to start with, for a one time annual profit, its been going downhill ever since. Then came Gigaba and the Guptas and made it worse. Why would you give up a route with a loadfactor 80%+… So that Etihad could fill the gap.

The bean counters who are now SAAs top management do not see that SAA has a subpar hard product in a premium market, except those 2 A333s with newer hard products. And that is what you need to attract and keep your customers.
And that might turn it around.
Oh and of course the usual financial efficiencies in business.

A lot of business / premium travellers on the LHR route simply will not book on SAA now that it has only 1 daily service, nice as the new A330 might be. The risk of a cancellation or lack of capacity to make a last-minute flight change is simply too high. This also hampered Virgin’s offering on the route, which is presumably one reason they’ve seized the gap to operate a double daily service. The new SAA CEO’s reason that he reduced frequencies on the LHR route because “it is unprofitable” tells you all you need to know about SAA and its prospects. They can’t turn a profit on a route on which two profit-driven foreign airlines are eagerly expanding capacity.

Well…not strangling. More like tugging on the legs to make sure the hanging is proceeding apace.

Load All 38 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

GO TO SHOP CART

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2