Africa stands to lose if SAA sinks. So does Joburg
SA’s commercial capital owes much to the airline’s connections, say experts
● Derided at home and loved abroad. That is the nature of the fix SAA finds itself in as, for the umpteenth time, it has to beg the government for billions of rands to remain a going concern.
But while the perpetual bailouts sought by SAA have become a burden on the National Treasury, outside South Africa’s borders the airline has a significant market share of African skies, servicing some 25 routes.
It enjoys a dominant perch in countries such as Angola, Botswana, Mauritius, Mozambique, Namibia, Zambia and Zimbabwe — where it is the market leader in tourist and business travel and cargo movement.
For these countries, among others, SAA is the de facto national airline.
With its 10 daily flights into Zimbabwe, SAA controls about 30% of that country’s aviation market. It is the preferred airline for travel on the Harare-Johannesburg route and last year alone carried about 370 000 passengers — making it SAA’s most lucrative route in Southern Africa.
It has long since elbowed out Zimbabwe’s national carrier, Air Zimbabwe, which is indebted to the tune of about $350-million (R4.3-billion).
According to Routes-Online, a firm that tracks international routes, of the top 10 destinations flown by SAA last year, six of these were in Africa.
After Harare-Johannesburg, the most lucrative routes for SAA last year were Johannesburg-Lusaka, Johannesburg-London, Johannesburg-Maputo and Johannesburg-Windhoek, according to the firm.
In a fourth-quarter update, SAA conceded that it had found the going tougher outside South Africa’s borders. International sales declined 11% and regional sales by 6%. The fall, it said, was driven by higher fuel costs, lower passenger volumes and currency fluctuations.
And not all African routes have been kind to SAA. The airline abandoned routes in West Africa as part of cost-cutting measures. Estimates had put the losses suffered by SAA from the unprofitable routes at about R350-million a month.
But as the future of SAA comes under scrutiny, the nagging question is what impact its declining fortunes will have on African travel.
Jimmy Conroy, chairman of the SAA Pilots Association, said SAA provided connectivity between South Africa and countries in the region, which fostered trade, provided employment and helped maintain good relations.
“If SAA were to fold, there would be the loss of 10 000 jobs, disruption to the tourism industry and there would be an impact on the economy. While other operators could take up the slack and pick up where SAA left off, the government would lose control over frequencies and destinations that the national carrier operated to,” Conroy said.
John Grant, an analyst at OAG, a UK-headquartered aviation firm, told Business Times this week that SAA was an “integral part” of Africa’s aviation industry.
“Should anything happen to SAA . . . then previous experience of such demises around the world suggests that for a while, there will be a shortage of capacity that may lead to an increase in passenger fares,” Grant said. “A mix of expansion from existing and perhaps newly formed airlines will fill that gap and balance will be restored. What may not be replicated is the current hub-type connectivity that SAA offers in Southern Africa. It requires a large airline to operate such a schedule.”
Vuyani Jarana, another in a long list of SAA CEOs over the past decade, said the airline saw the possibility of stronger partnerships with smaller airlines in Africa. “These are things in our corporate plan and strategy but it’s going to take a bit of time to get there. We want to be a focused player in the international domain, making sure that we are not just chasing market share and sacrificing profitability.”
Without a strong SAA presence on the continent,
The loss of the hub would not really be met by [African carriers]
John Grant
Analyst at OAG
it is likely that the shine would come off Johannesburg, as it owes a significant part of its transformation from small mining town to modern metropolis to the rapid growth of the airline during its boom days.
According to a report titled State of African Cities 2018: The geography of African investment, which will be launched this week, Johannesburg is the topranked African city in terms of strategic position.
Part of this is due to the connectivity of the city to the rest of the world.
“The loss of the hub and connectivity that SAA provide today would not really be met by either Ethiopian Airlines or Kenyan Airways; both of their hubs are significantly north of the region,” said Grant.
As SAA ponders an uncertain future, rivals such as Ethiopian Airlines are turning up the heat.
Ethiopian Airlines is increasing its fleet to 100 planes and has introduced new routes — even on SAA’s doorstep, to tourist attractions such as Victoria Falls and Cape Town.
Last year, it was awarded a licence to operate domestic routes in Mozambique.