Turbulent times for SA’s airlines
ON AUGUST 26, 1929, South Africa launched its first commercial airline under Union Airways Company (Pty) with the first flight travelling between Maitland and Port Elizabeth. On board were five bags of mail. Then, on April 24, 1976, Union Airways, which had now rebranded to South African Airways, operated the world’s first commercial flight utilising a Boeing 747SP. The aircraft flew the Johannesburg-Lisbon-Rome-Athens route.
For any airline to be successful, a number of factors ought to be considered. These include geographic location and good interconnectivity policies. Increased interconnectivity within global airline markets has over the years marked the commercial airline industry with a distinct dynamism – in an external environment as well as the internal operations of any airline.
This dynamism indicates how the highly sensitive industry has, over time, grappled with challenges of product innovation by suppliers, intense competition from strategic alliances, bankruptcy protection and increased costs of labour, fuel and security measures.
In 1993, most companies around the world reported that there was a clear indication that the industry had lost huge amounts of money in the past few years, and it has never made a sustained, substantial return on investment, particularly for legacy carriers.
And South Africa’s commercial industry has not been spared. It has, over the past couple of years, found itself in a chaotic state. It is therefore worth reflecting on what has gone wrong over the years.
Take the now-defunct Nationwide Airlines, for instance. The airline operated as a privately owned business that started well in 1995 with 800 employees, operating charter services within Africa for the UN. The airline kicked off its domestic operations in December that year. In 2003, it made its debut intercontinental service with the wide-body Boeing 767-300ER. But in November 2007, a Nationwide Airlines Boeing 737-200, with the registration ZS-OEZ and which operated flight 723, lost its right engine a few seconds after take-off in Cape Town. The aircraft was scheduled to fly to Johannesburg.
This was the beginning of the demise of Nationwide Airlines. Its liquidation proceedings kicked off in May 2008. Seven months later, the Boeing aircraft went under the hammer at an auction.
Another airline that recorded similar misfortunes was 1Time – the first low-cost airline that operated between 2004 and 2012. 1time operated domestic and regional flights. Its main base was at OR Tambo International Airport. In November 2012, the airline went into liquidation and ceased operations.
Despite various initiatives and interventions to keep it afloat, including those of a liquidator, its operations remain suspended. This is in addition to the business rescue practitioner at the time advising the company that there were no reasonable prospects of survival. The airline soon filed for liquidation, cancelling all flights and leaving hundreds of passengers stranded after a final meeting with shareholders.
Not forgetting that in 2011, then minister of transport Sibusiso Ndebele, to much fanfare, announced the launch of an airline by the SA National Taxi Council, Santaco, which never materialised. Reasons for its failure to take off are still unknown.
There were other airlines such as Velvet Sky that came and left, while others stayed for a year or two. But the bottom line is that none conquered, showing that the airline business is not child’s play. Back then, fuel costs had been a thorny issue for most of these airlines – a challenge the industry still battles with today.
It’s no secret that South Africa is at the southern tip of Africa and one of the key hurdles that a number of airlines face is that as a country, we are simply unable to create a conducive and practical corridor for connectivity to other continents. This renders it difficult for any international airline operating in South Africa to break even. As a result, the industry will take much longer to recover.
To further paint the uncertainty of operating in such a complex industry, Comair suffered the same blow. But instead of remaining permanently grounded, the aviation company elected to go through with a voluntary business rescue, which was handled very well and managed to retain more jobs that could have been lost in the process. Comair management kept Kulula and British Airways services grounded during the Covid-19 lockdown level 4 and they will now return to the skies by September. With the emergence of the Covid-19 pandemic and the continued lockdown regulations which have seen many businesses go under, any new airline planning to enter the commercial market would be embarking on a suicide mission and entering uncharted waters. This is because issues facing our airlines cannot be resolved overnight.
It will take time, if not years, for the industry to recover and operate on the same standard as industries in Europe and North America.
Now Mango and SAA find themselves in a similar situation. Despite a tumultuous period, the SAA will resume its operations in September with domestic and regional travel as confirmed by acting chief executive Thomas Kgokolo. Mango will remain grounded as it is currently occupied with implementing a rescue plan.
It seems that the only way for an airline to survive is to get the business protection in place. One of the key factors we should have implemented a long time ago as a country was to support the industry by developing a policy that will protect the operators that would like to enter the market.
At this stage, there is no investor who would risk investing in any airline business because of the issues that face the industry. The pandemic has had an enormous impact on the aviation industry, affecting passenger traffic, air cargo demand, airport workforce and incoming revenues.
Business travel will also take longer to recover, and even then we estimate it is only likely recover to around 80% of pre-pandemic levels by 2024. Remote work and other flexible working arrangements are likely to remain and people will take fewer corporate trips.