South Africa Plans New National Airline

Filed Under: South African Airways

A few days ago we learned that South African Airways is preparing to liquidate, as the government has refused further funding for the airline, and will soon be laying off all staff. The airline has been losing money for many years, though the current situation has made matters even worse.

Well, it appears like the situation might not be quite as we expected.

South Africa to form new national airline

Reuters is reporting the South African government has made it clear that they intend to create a new financially viable and competitive airline from the current business rescue process.

This came via a statement from South Africa’s public enterprises ministry, as the government will work with SAA trade unions to preserve as many jobs as possible.

I’m skeptical…

I’m skeptical about the prospects of this for a couple of reasons:

  • The government is not in a position to provide more capital for SAA, but presumably any sort of airline reboot would be extremely costly
  • I can’t think of many examples of airline reboots that succeeded in this manner, where a national airline supported by the government technically goes out of business, and then a new, successful national airline emerges, presumably still supported by the government (it actually sounds a bit like Air Zimbabwe)

South Africa needs a good regional airline

When writing about SAA potentially liquidating, I posed the question of whether South Africa would get a new national airline, so I guess I wasn’t too far off.

In my opinion what South Africa needs is an airline that offers a good network domestically and regionally, rather than a good long haul network.

When you look at the South African Airways “family” right now, you have:

  • South African Airways
  • Mango, which is South African Airways’ wholly owned low cost carrier subsidiary
  • SA Express, which isn’t owned by South African Airways, but which operates as a regional airline for the carrier

Between those operations, a new airline would have to figure out a cohesive way to offer regional service.

I don’t think South Africa actually needs a long haul airline, because these routes can be tough to operate in a profitable manner without a bigger strategy:

  • The Gulf carriers all fly to South Africa, offering connectivity to all parts of the globe
  • Most major European airlines fly to South Africa, also offering good connectivity
  • Ethiopian Airlines is a powerhouse in Africa, so we could see them increase connectivity to South Africa, so you can get to most points in the world in one stop

Even out of South Africa, South African Airways hasn’t been able to compete with other airlines in terms of price, product, and schedule.

Bottom line

South Africa plans on creating a new national airline, which has me questioning if they actually plan on cutting off SAA at all.

If there’s any chance of things actually changing, I really think they need to shut down SAA altogether, and then start from scratch, because otherwise it’s unlikely that any of the core problems of the airline will actually be addressed.

If a new airline does emerge, I strongly believe the focus has to be on offering regional connectivity, and having one or two strong partnerships (or even joint ventures) for global connectivity.

What would you like to see from a new national airline in South Africa?

Comments
  1. There is a more detailed update from Reuters later on: https://www.reuters.com/article/safrica-saa/update-1-south-africa-aiming-for-new-viable-airline-from-saa-business-rescue-idUSL5N2C937H

    One thing is clear, the government isn’t sinking any money into SAA or a new airline, they’re just saying what the unions want to hear. Whether an airline emerges ouf of business rescue proceedings will depend on the commercial viabilty only. There’s a definite shift here towards only rational spending, especially given the COVID situation and massive stimulus package on that front announced by the government last night

  2. Airlink has zero relationship with SAA anymore (other than suing them to recover monies owed). They will be operating exclusively under their own “4Z” code going forward and will not even be accepting SAA issued tickets for travel on their services.

    SA Express however is a different airline that is also wholly owned by the Government of South Africa, and is also in its own business rescue process.

    Neither should be confused with Mango, which is a third airline that is also wholly owned by the Government, but is nominally profitable.

  3. Hi Lucky,

    Airlink is entirely private and when South Africa’s lock down ends will operate on its own code. Furthermore, Airlink is very much profitable and has been actively distancing itself from SAA in recent years.

    SA Express is another state owned entity (who uses the SAA flight code). They too are making a huge loss and a consortium Fly Modern Ark are looking at buying the company from the government.

  4. I can’t think of many examples of airline reboots that succeeded in this manner, where a national airline supported by the government technically goes out of business, and then a new, successful national airline emerges, presumably still supported by the government (it actually sounds a bit like Air Zimbabwe)

    –> Sabena to Brussels Airlines is such an example: regional governments and their investment banks put in money to get SN going. Last year it was sold to Lufthansa.

  5. The politicians in South Africa obviously need a vehicle to conduct corruption on large scale. So obviously they need an airline…

  6. I can’t think of many airline re-boots where a new successful national airline has emerged.

    I offer up another successful example, Swissair’s bankruptcy and relaunch as Swiss international airlines.

  7. I have been using SA air for 10 years and I have stopped using for 3 years.
    I witnessed fights yelling each other between customers and flight attendants over a small thing like drinks.
    I think SA air do not understand the a basic of business.
    People in SA air are not running business.
    It is not business practice.
    The national air is bad idea..it will drain the fund again.
    Grand the license to a private company..
    They know how to run business and how to treat customers.

  8. Their location geographically does not warrant a long range airline. Any flight to any major business center is 10+ hours a way. That is not sustainable.

  9. In my opinion a post Corona South African domestic market could very well be served by Airlink, Comair/BA, Kulula, Mango and FlySafair. Too many empty seats have been flying around in South Africa for the past few years. I don’t understand why a ‘new’ SAA would be needed for domestic flights.
    Above mentioned carriers could pick up new domestic and also regional routes.

    Having a new (!) SAA for key international routes would be nice as long as ‘new’ really means ‘new’ ! A fresh start from scratch with all staff having to re-apply for a job to an also completely new board and management. Preferably all private, international and without major Government involvement. This would be the only way to avoid the old corrupt structures can continue.

    Will this happen ? Most likely not. Funding badly needed for new efficient aircraft would cost investors a fortune. But it would indeed be an advantage for tourism to see also a South African Airline picking up visitors in key source markets and flying them South on revamped schedules and with cabins and sevice reflecting this attractive destination.

    By the way, what is Erik Venter doing these days ?

  10. @Michael I was thinking along the same lines. A new state-owned airline is a pipe dream. With SA’s credit rating in junk territory there won’t be any funding, even when backed with govt guarantee.
    @MArkus There’s some peculiarities here. Gauteng is a bit the African equivalent of South California: perhaps 20% of African GDP is produced in the Joburg area. On top of it, Joburg is the only meaningful passenger transport hub in the whole of Southern Africa (say, the countries where they drive on the left). And while it may be a long flight to the rest of the world, flights to Europe are basically in the same time zone so no jetlag. It’s just an overnight flight. A long-range airliner does perfectly make sense here. There’s a good reason why Joburg is/was one of the few airports in the world with direct flights to all inhabited continents.

  11. It’s true SA is connected to the world via the Gulf and Europe, but that makes for an awfully long trip when traveling to South America or Australia, even North America or Southeast/East Asia. There’s got to be some long haul demand for at least one of these routes to be serviced more directly.

  12. It is sad that such a storied airline has to go under because of totally incompetent management and government interference. Irrespective of the apartheid history, the government should have followed the Ethiopian Airlines model where even the socialist/communist government allowed their airline to run properly – and now it is the largest airline in Africa!

    From a regional aspect, between Comair (flying as British Airways (BA) and Kulula (MN) together with Safair, SA Airlink and CemAir should be able to ramp up to meet the additional demand from SAA being shut down. They may well want to purchase or take over the leases of aircraft and equipment from SAA.

    From an international aspect, flights are available from all the major airlines. IF United survives, their direct EWR to CPT flights will probably become year-round. After all, who really wants to fly to slum-ridden run-down Johannesburg only to have to connect to the game reserves (which now have direct flights from Cape Town) or Cape Town – where the majority of the tourist attractions are – and in a well-run, clean environment….

    Delta will likely continue their Johannesburg flights and, given that there is likely to be massive spare equipment, there is a strong possibility that AA might want to consider direct flights either to Johannesburg or Cape Town, possibly from Philadelphia.

  13. @RickyP Cape Town may be lovely but it’s at the end of the world. Going through CPT is a massive detour to all other meaningful destinations in Southern Africa. And capacity at CPT is quite limited compared to JNB.
    As for the slums, not sure if you’ve ever been there. I would judge that Joburg’s Soweto compares favourable to Cape Town’s Khayelitsha (just to name the largest townships).

  14. Like Lucky said – no need for a new national long-haul airline in South Africa, the connectivity is great as it is.
    JNB is one of very few airports to have non-stop flights to all continents – including ATL, GRU or SYD. And will keep this status even with South African going out of business.

  15. @jasper I will agree to disagree
    The slums I am referring to are the city centers, not the townships.
    I have recently been to Johannesburg, Pretoria, Durban, Kimberley and Cape Town – and the only CBD where it is even safe to get out of the car is Cape Town. All of the others (previously dynamic city centers) are run-down, boarded up and dangerous. Even Johannesburg – the center of economic activity, the business CBD has moved out to Sandton/Rivonia.

    If you are heading to SA on business, yes, definitely fly in to SA via OR Tambo (JNB) airport – and connect to Sandton via the excellent Gautrain service.

    IMHO, if you are travelling as a tourist, don’t bother – fly direct to Cape Town. As a tourist, most meaningful destinations are the Cape, Garden Route, and the game reserves and there are flights directly from Cape Town…

  16. Mango is really interesting. They are quite small but they operate as an almost independent carrier to SAA with a different board and balance sheet. Therefore they might be able to continue operations without SAA although if there is money coming in from SAA and that gets cut off then Mango might be grounded. On a side note the Mango livery is amazing. It’s so distinct and with far more orange than even easyJet, which is kind of ironic because Stelios Haji-Ioannou (easyJet founder) owns an airline in South Africa called FastJet.

  17. @RickyP Ja I understand your point. I agree Cape Town (and by extension the Western Cape) is very different from Joburg (and Gauteng).
    I think both places have a lot to offer to tourists. As for nature and vineyards Cape Town and its suroundings are stunning, and it’s the centre of african design and perhaps also fashion. But Joburg has the better museums, arts scene, and would definitely be the prefered destination to sample modern urban african life. Cape town is lovely, and Joburg is lively. And for food, both places offer unparallelled value.
    Am not sure about safety; I would avoid downtown Cape Town (say Long St) at night, whereas some areas of downtown Joburg are safe at all times (but others are definitely unsafe at all times). Cape Town is perhaps a bit more manageable though in this respect.

  18. I have two tickets booked on cancelled flights. SAA serves the US, so bound by US law. I want a refund. So far they are only offering a voucher to be used within two years, which doesn’t have mean if the airline is liquidated. Anyone have any insight?

  19. @Noah – Fastjet is now owned by Solenta Aviation rather than Stelios. It is a complex structure with the UK based PLC being the holding company, etc.. but control is now entirely with Solenta who plan to use the Fastjet brand together with their Federal Air AOC.

  20. @Noah Bowie – As per earlier reports attributed to the Business Rescue Practitioners – Mango, SAA Technical and AirChefs are 3 subsidiaries of SAA that are expected to be viable as going concerns in the event of cessation of trading by the parent company.

  21. I have to ask the same question as K Stew. I have 5 tickets booked. Flights cancelled. Any ideas on the possibility of refunds would be appreciated.

  22. @Louis and @K Stew hope you have better luck than I did. Back in November/December i tried to book an internal ticket online on the SAA website. All went well, credit card payment apparently processed properly and confirmation issued…. 10 minutes later I got an email stating that there was a payment issue and the transaction has been cancelled.

    Called the NYC SAA office. They stated that I needed to call SAA in South Africa. After waiting on hold for about 50 minutes (at international calling rates!) got hold of someone who tried to book the tickets from their side – without success – or so it seemed….

    Eventually, out of desperation, I manage to book the tickets through Chase travel using points. Two weeks later I found that the manual reservation HAD been successful now we had two sets of tickets for the flights.

    Obviously Chase has a no cancellation policy, so I contacted SAA again and the issue was forwarded to their Refunds department…. that was over three months ago and I have yet to see any sign of a refund! Given that these were internal flights, the costs were not very high so I really don’t expect to see anything from them at any time in the future and have written them off!

    I truly hope you will be more fortunate – but possibly get your credit card company involved!

  23. SAA and SA air Express have a long history of horrid theft and looting. This will not change with whatever comes next.

    As a South African,I think the last time I flew SAA was in 1997. Otherwise I feel more comfortable with BA ,Emirates or KLM. Now this is from my own country.

    And the example of an airline that went through bankruptcy then produced a successful airline (as the one comment from Mark said ) which was Swiss Air. You guys need to remember Switzerland is NOT in Africa .

    I have no hope for the future. It’s sad as South African Airways has such a long proud history. All of that was destroyed in a short 10 years. Such a shame.

  24. a Southern African carrier in cooperation with Namibia, Botswana, Angola, Mozambique, etc might be more viable —

  25. As a South African I’ll let you in on how things work in the country. The reason for the demise of SAA is due to what we called approved suppliers . These are nothing more than politically connected people to the ANC. SAA is then instructed to buy say bottled water from the ‘approved supplier’ but the price is always more than a 1000% more than what you and I could buy bottled water at , at wholesale. Same goes for food, avgas or whatever else you need to run an airline.
    The middlemen make a creaming and pay back some money to their connected friends in the ANC and round and round we go….
    I reckon Cyril Ramaphosa has a plan. He knows by letting SAA go down… so do all the approved suppliers. He wipes the slate clean

  26. I would think of that SAA could comfortably maintain three or four core trunk routes (eg: JNB-JFK, JNB-LHR, JNB-FRA, JNB-BEJ and possibly JNB-MNL. These core routes would allow a presence of sorts. All other long haul destinations could be comfortably taken up by Emirates, Etihad, Delta, JAL, Cathay Pacific..

  27. S. AA ALSO USED TO FLY THE JOHANNESBURG TO PERTH ROUTE. A LOT of people have family in Perth. I usually fly Quantas because I have family in New Zealand. Perhaps Quantas will take over the route

  28. SAA is a strategic organisation to help speed the transformation of airline space in the country. Ofcourse it has failed dismally. Liquidate it and shift focus to Mango. Politicians must not interfere in its running but it must further the plight of transformation. We need more black and women pilots. We also need proffessionalism within the company at all cost.

  29. SAA has been struggling for a very long time and I think it will be good for them to completely shut down operations. After that, they need to partial privatize and seek a strategic partner. It will be best if they could service the regional network first providing competition to ET but at the same time operating a few international routes until it comes a time when they’re up on their feet

  30. I advise PRIVATIZE the solution to our problem regarding an International carrier for South Africa

  31. Hello, the “state capture” is still pending. The current pandemic does not make it null and void especially since many pockets are still lined with tons of cash from all the swindling within SOE’s

    The reason SAA is where it is today is purely due to all the swindling as brought to light in the current state capture.

    Look at ESKOM, look at SABC … People need to be held accountable and pockets need to be emptied!

    If our government really cares about this country and this nation they will practice transparency by making all financials within SOE’s accessible on a website for anyone to view at any given time. As long as there is no transparency swindling will continue, be it with the Gupta’s or whichever other groups or “clans” arise …

  32. The Government needs it’s own Uber service… so it’s definitely not a stretch of the imagination that they will concoct another failing enterprise on the taxpayer’s backs. Viva ANC

  33. Why not convert Mango Airlines as the new airline – i think it will be more costly as creating a new airline

  34. Proudly South African
    Debbie.
    It will be in the best interest of the current economy and yes, to cut out the middle man and start on a clean slate where books are being closely monitored with stringent rules and a staff compliment that is not inexperienced.

    Should this be a replacement to get a new world class airways as it used to be in the past it would be not a bad idea to re-employ some of the current staff of SAA that have the know how and expertise of Avian to keep world class standard. Afterall SAA used to be world class and so, keep some of that behind with a refresher of new Staff coming in.

    It is very costly for any company to train staff all the time and with the current situation as is where the unemployment rate is already spiralling downward at a fast pace this way you try and level it out not to let the unemployment of such a big company be so high.

    Invest in the employees under different rules and regulations and start fresh.

  35. The first question ALL (Soth African) taxpayers are justified in asking is, “Who were the auditors of SAA from the get’go?”
    Next question; “What have said auditors been doing, with specific reference to the yrard post 1994?”
    Threafter, any businessman, sorry ‘business person’ will not need a std six bookkeeping teacher to suggest which questions SHOULD follow.
    In the same breath, the question SHOULD be raised as to possible recompense by said auditors.
    Because, until those managing Any and All of South Africa’s State Owned Enterprises, carry out their specific work honestly, realising that they are ‘servants of the taxpayer’ etc, as are Ramaphosa and everyone in government, South Africa will NOT arise and shed it’s ‘junk status.’
    MY ADMONITION IS THUS;
    “Face up to the challenge ye who would be in the employ of the South African Government – ease and desist from taking from government coffers what you are NOT legally entitled to, because it is in fact stealing from your NEIGHBOUR, AND, YOUR OWN BACK POCKET.”

  36. Quite a pity.
    As noted above corruption in South Africa is rampant as politicians grab whatever they can while they can.
    I was able to fly on a 747sp many years ago in first class. If I remember Correctly there were 8 first class seats in the dome. Northwest had a similar configuration for their first class in the dome on their 747-100 and 200s.
    My experience on the South African Flight in First Class was fantastic. Perhaps it was because it was one of the first experiences I had in First class. The crew in First class was wonderful. I remember it was my first flight with a female captain. She came around the First class cabin and introduced herself.
    That must have been the last of the 747SP’s. I wish I could remember the year of the flight. My ex wife tossed out all of my old boarding passes!
    Maybe that is why I divorced her….

  37. South Africa does no

    NOT need a national carrier at all at this stage. We have so many other much more desperate needs in SA on which to spend the little money we have – housing, education, road upgrades, medical care and so many more.
    Let’s use our resources for the actual benefit of the people of this country and give them what they thought the ANC was going to give them – a better standard of living, not an airline they can’t use anyway

  38. News24
    R200m for SAA’s ex-CEO
    2001-05-31 11:59
    Johannesburg – Coleman Andrews, former CEO and president of SA Airways (SAA), was paid out as much as R200 million, tax free, during his two-and-a-half year tenure at the airline, in what is one of the most rapid accumulations of wealth in SA’s business history.

    Business Day on Wednesday unveiled the story behind Andrews’ departure from SAA 14 months ahead of the end of his contract.

    His tenure at SAA was a lot more turbulent than outsiders have so far been told. There was significant tension between Andrews on one hand and top officials in Transnet and the public enterprises department on the other, the newspaper said.

    In the middle was former Transnet MD Saki Macozoma, who brought Andrews into SAA in June 1998. Macozoma himself left the transport utility several months before his contract ended, amid speculation of tension with the public enterprises ministry and Public Enterprises Minister Jeff Radebe.

    One of the main problem areas was the employment contract, forged by Andrews and Macozoma in 1998, which one top government official said “broke every corporate governance rule in the book”. There was much concern about the cost to Transnet of Andrews and the consultants – such as Bain & Company and McKinsey – whom he employed at SAA.

    The cost of his total package, coupled with payments of about R310 million to consultants in the past 12 months, amounted to more than half-a-billion rand. Against this, SAA made a net profit of R350 million in the year ended March 2000.

    Endorsed by the previous public enterprises ministry, the contract allowed for Andrews to be paid an annual bonus based on SAA’s operating profit.

    According to Business Day, the contract is also understood to have included an annual salary of R1-1.2 million, a generous share option scheme as well as other incentives and a severance cheque of R60 million, paid to him when he left on March 31 this year.

    Due to confidentiality agreements, neither Transnet, which owns 80% of SAA, nor Andrews is prepared to comment on the size of the pay package.

    Macozoma said on Wednesday that while Andrews’ package tended to be exaggerated, Transnet had to compensate him for moving to South Africa when the country was receiving bad publicity for its high crime levels. He said the key issue was what value Andrews had produced. “(In terms of SAA’s financial turnaround), this is indisputable,” he said.

    Andrews was employed by Macozoma after an international search. At the time, SAA was heading for a loss of up to R500 million and Andrews helped the airline stage a dramatic turnaround.

    As a result of SAA’s improved financial fortunes, the Swiss-based SAirGroup, now called Swissair, paid R1.4 billion for 20% of SAA in 1999. This significantly increased SAA’s value.

    However, serious doubts have been raised in government and transport circles about the sustainability of SAA’s recovery, Andrews’ aggressive way of doing business and concerns over corporate governance at SAA, says Business Day.

    Several events brought Andrews into conflict with the public enterprises ministry. Key were concerns around the process leading up to SAA’s choice last year of Seattle-based Boeing for the replacement of its regional fleet, rather than the European Airbus.

    Relations were further strained by SAA’s role in the 1999 demise of Sun Air, government’s privatised black empowerment vehicle, and by its decision to set up an e-commerce travel agency, Veer.com, in New York.

  39. I Salute – I Solate!! You’re right “Covid is Hell” South Africa should not put ALL their eggs is a local or regional Airline basket!!!

  40. That was a matter of time before RSA government decide that RSA is too big & too significant country not to have a decent national long haul airline. Also some long haul routes outside Africa are too important & lucrative not to have a non stop flight to Johannesburg or Cape Town namely: London-Perth-Washington-Frankfurt and possibly Sao Paolo.

  41. All of this stuff about routes being needed is total BS. There are plenty of flights thru the Gulf, Europe and Ethiopia. I am laughing so hard at the dude who claims anyone needs to fly from Philly to Jo’burg….or to Perth because some white South Africans moved out there. How dumb do you think they are? Even the local and regional routes can easily be handled by others. If no one can make money flying to Lilongwe or Dar who TF cares? the whole SAA is a big shell game and no one will notice when it’s gone except the staff who will be made redundant.

  42. The fact is that not a single country in the southern Africa region could sustain its own long-distance airline. Unless a few of them (South Africa, Zimbabwe and Botswana for example) come together and sponsor a private joint airline similar to SAS, they will fail. They must unite on this if they want success.

  43. SAA was the actual ( de facto ) regional airline for the whole of Southern Africa. Comparing to the SAS model in Scandinavia is none sense as those 4 countries are of similar sizes in many aspects. RSA is way too big when compared to its Southern African Nations.

  44. In the sixties and seventies SAA was without question one of the best airlines the world.
    One of the first to fly 747-SP’s(remember them) non stop around the bulge of Africa to Europe.
    Champagne and Beluga caviar all the way.
    Being an international airline it was integrated even in the apartheid years.

    Of course there were no flights into Africa or over african airspace. Just domestic and the rest of the world.

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