SAA readies for takeoff

Airline resumes flights on Thursday, ticket sales said to be good

SAA, which finally takes to the skies this week after being grounded for close to 18 months, says the passenger loads it is getting for its first Johannesburg-Cape Town flights were signs that its customer base is still there.

A deal to sell 51% of the state-owned airline to the Takatso consortium is still being negotiated, with the department of public enterprises saying the Takatso consortium, the preferred strategic equity partner, and the department are in the final stages of a share sale and purchase agreement.

Takatso CEO Gidon Novick said “finalising the share purchase agreement is taking some time, given the complexity involved”. He reiterated that the due diligence process was “substantially completed with no major issues”.

Though Novick could not provide a time frame for the completion of negotiations, he said: “Our teams are working hard on resolving outstanding issues. We’re intent on getting this deal done.”

Takatso consists of Global Aviation, owner of the new low-cost carrier Lift, and panAfrican infrastructure investor Harith General Partners. Takatso chair Tshepo Mahloele is also chair of Arena Holdings, which publishes the Sunday Times.

Last month, Takatso, which intends to provide about R3bn in funding for the new SAA over three years, said it is not yet involved in the management or funding of SAA, nor its relaunch plans.

The airline will take to the skies on Thursday after opening ticket sales two weeks ago. SAA interim CEO Thomas Kgokolo said this week that since SAA opened ticket sales it had noticed that for Johannesburg-Cape Town flights it was “getting good [passenger] load factors”.

Kgokolo, who was speaking this week on a panel discussion hosted by Business Day Dialogues and the Unisa Graduate School of Business Leadership, said: “That is good for a brand that we are trying to rebuild. These are encouraging small pockets of success.”

Last month when SAA, which exited business rescue at the end of April, announced that flights would resume from September 23, it said the initial rollout phase would see it operating “flights from Johannesburg to Cape Town, Accra, Kinshasa, Harare, Lusaka and Maputo”.

It said at the time that more destinations would be added to the route network as it built up its operations in “response to market conditions”.

As far as the initial domestic route is concerned, the group will fly Johannesburg to Cape Town return three times a day.

The airline is starting operations with six aircraft, and will retain 88 pilots in the operational structure, from 268 pilots previously.

From September 27, SAA will operate daily return flights to Harare, Lusaka and Maputo, and flights three times a week to Accra and Kinshasa.

“You get a sense that from a market perspective people are still associated with the [SAA] brand and I don’t think we would have lost that market all of a sudden as well,” Kgokolo told the panel.

However, he said he “must admit a lot of our customers are hurt because some of them had booked with us when we went into business rescue and we are still processing those particular vouchers in terms of redeeming them. And we apologise for that, and that is something we are trying to speed up as well.”

Kgokolo said that as far as the regional routes are concerned, these are still of concern because there is not much happening in the way of travel because of Covid-19.

But he said the regional market in the rest of Africa would be a key growth avenue for SAA in the future.

Though the continental market is highly competitive, like SA’s domestic market, there are more opportunities for SAA to build up a presence, he said.

“If you look at the route between Lagos and Johannesburg, we don’t have more than three competitors there, and there is quite a huge volume there, and we believe that those are the areas we need to explore.”

The plan at a later stage, as SAA builds its fleet, is to focus on international destinations that were strong revenue generators in the past, such as the UK, US, Germany and Brazil.

He said the problem in the past was that SAA used older, less fuel-efficient aircraft, which meant it couldn’t operate them as profitably. It had kept those routes and hoped that as vaccines rolled out worldwide and SA was removed from other countries’ red lists it could service those routes far more profitably.

“If your aircraft are older and they are not fuel-efficient, your costs become higher. We need to make sure we get the right fleet to do those trips and minimise those costs and then we will be able to compete.”

Kgokolo said in the past SAA was able to build itself into an airline that generated revenue of about R30bn, which illustrated its potential. One of the key factors that affected the airline over the years had been internal operational costs. Kgokolo said what SAA “could have done better was managing costs” and “building reserves”.

The department said SAA has emerged with a competitive cost base and this positioned it well for growth. It is also coming into the market with the load factors looking positive, which positions it well to sustain profitable flight operations.

It is uncertain when SAA subsidiary Mango, which is in a separate business rescue process, will take to the skies again. A spokesperson said only that business rescue was under way.

We need to make sure we get the right fleet to do those trips and minimise costs Thomas Kgokolo

SAA interim CEO