South Africa: South African Airways to undergo radical restructuring

The Department of Public Enterprises says that South African Airways will undergo ‘radical restructuring’ to ensure financial and operation sustainability. The department said in a statement on Sunday (1 December), that SAA has been through ‘difficult challenges’ adding that the recent strike action at the airline caused immense damage to the airline’s reputation, operations, and finances.

“SAA therefore cannot continue its current form,” said public enterprises minister Pravin Gordhan. “The South African government is committed to a viable, sustainable, profitable national airline. In pursuance of this, various options are being explored.

“SAA is determined to remain open for business. Management is also committed to ensuring financial sustainability going forward. “(The) SAA board and management will intensify its marketing campaigns to rebuild confidence in the airline and will take bold initiatives to increase its market share,” the minister said.

Possible partnership

In its statement, the Department of Public Enterprises also alluded to the fact that it was pursuing ‘various options’ in making the airline profitable. This follows a Sunday Times report which indicated that the airline was considering a joint venture with Ethiopian Airlines. The plan – which has been seen by the paper – proposes a strategic partnership with Africa’s largest airline, to be located in Johannesburg and managed by top executives from both carriers.

This solution would have seen SAA consolidate its staff and routes, creating a commercial joint venture between SAA and the international airline. It also lists Emirates and Lufthansa as other possible candidates in a strategic partnership with SAA, but opted for Ethiopian as the best-suited partner. “Given the thin margin nature of the airline business, under government control or under government rules, it is unlikely SAA will deliver better margin performance. Government should consider exiting the airline business,” the document stated.

“The biggest opportunity is to grow the West Africa hub together where traffic throughout Africa is consolidated, before connecting to the US and Canada.”