South African Airways (SAA) is poised for growth
It has now been nearly two years since SAA emerged from its business rescue process in 2021, a process that led to an extensive restructuring in all key areas of the business. This reorganisation and subsequent changes are beginning to bear fruit.
After emerging from the business rescue process, SAA resumed flights in September of the same year, beginning with just three routes (which grew to ten routes by the end of December last year). SAA has since operated nearly 9,000 commercial flights, delivering more than 1.2 million seats.
The one key point that stands out is customer affinity to our brand, SAA is a strong brand across the globe and our presence was missed. We do not take for granted the return of our customers and the SAA team is committed to providing the customer experience attached to our national carrier status, SAA is truly the spirit of our nation.
It may certainly be difficult for those outside the airline to see just how dramatically SAA has shifted. I am saying this cognisant of various analyses and views, most of which are highly negative. But, from where I am sitting, SAA is well poised for survival and growth in the medium term.
We are not talking about the same airline
Are we the same airline that we were before we went into business rescue in December 2019? No. Not in terms of the size of our fleet, our route, or our staff complement. And in many ways, that is a good thing.
SAA the airline now has a staff complement of approximately 1,000 people – a fraction of the pre-business rescue staff size. We have seven aircraft, and since December, we now operate ten routes, excluding the destinations we reach through our codeshare agreements.
The massive, unwieldy giant has been replaced with a smaller airline that expands cautiously. In a departure from the SAA of the past, every new route is considered carefully to ensure profitability and long-term sustainability.
Our finances tell a promising story of recovery
Our financial performance has improved significantly and the third quarter financial results of SAA the airline were positive. It is important to note that SAA is a group of companies, the different companies’ results are consolidated and were marginally negative at the end of quarter 3, while the airline entity results were positive. There appears to be confusion in terms of whether SAA has posted positive results or not, the question is which SAA we are talking about.
It is an important milestone to achieve positive results, considering the airline had posted significant losses for several years and was the very entity that was placed in business rescue, nearly leading to the collapse of the entire airline group.
The airline business is capital intensive and it is important that it generates cash on an ongoing basis to fund working capital and capex. This aspect remains a balancing act, but we are glad that in the 2023 Budget Speech, Finance Minister, Enoch Godongwana announced R1bn allocation for SAA. Of course, this will be used to cover outstanding business rescue-related liabilities, specifically those relating to the final dividend payment to creditors and the refund of legacy un-flown tickets to affected passengers – which date back to the period when SAA was placed in business rescue in December 2019. The airline will continue to negotiate with National Treasury for the balance of the funds and ensure the airline meets all the conditions that may need to accompany the flow of these funds.
As with many airlines, at SAA we plan to increase our fleet size as we pursue growth and return to destinations we once serviced and/or new destinations. The growth in fleet and routes will contribute to the improvement of the bottom line as any increase in flying activities will enable offsetting the existing already optimised overhead structure without overly increasing the costs.
SAA is more than just an airline
Next year, SAA will celebrate 90 years in the sky. That is nearly a century of excellence in aviation, an unparalleled track record, and – it must be emphasised – a contribution to growing critical aviation skills on the African continent. Indeed, there are not many pilots and aviation professionals in South Africa, who have not, at some point, worked at SAA.
It is not an understatement to say that SAA has probably contributed to the growth of aviation on the continent more than any other airline – nurturing a cohort of expert pilots, housing rare skills and connecting places in Africa, that, in some cases, did not enjoy direct air connections before. From connecting governments on diplomatic missions to business engaging to striking game-changing deals, the impact of SAA cannot be underestimated.
This is a role that SAA has always played, and while it has admittedly diminished as we work to rebuild and streamline the airline, it is the space that we will undoubtedly reclaim in years to come.
It is the more intangible, but nevertheless important part of the story when we talk about the meaning of SAA. As we build on the finances and profitably – let us not forget that in many ways, SAA is more than just an airline.
