South African Airways has been losing money for years, and in early December 2019 the company entered “business rescue.”
What is business rescue?
With this business rescue process, a specialist practitioner has taken over control of the company, with the goal of maximizing the odds of survival for the company, or at a minimum achieving a better return for creditors than if the company were to just outright liquidate.
Understandably, a lot of us have been skeptical of this process. The reality is that the government is only willing to provide the company enough funding to continue operations, but doesn’t seem to want to let them liquidate, probably due to a combination of pride, as well as the value to the country in having a national airline.
South African Airways cuts some routes short-term
Just yesterday South African Airways issued a press release assuring “customers and stakeholders that flights to all destinations continue as normal.”
This followed media reports that the airline would cease operations soon. While the airline indicated that operations would continue as normal, today the airline has announced some short-term cancelations.
What flights has South African Airways canceled?
- Between January 20 & 24, the airline has canceled up to two daily flights between Johannesburg and Cape Town
- Between January 20 & 23, the airline has canceled up to three daily flights between Johannesburg and Durban
- Between January 20 & 25, the airline has canceled daily nonstop flights between Johannesburg and Munich
In all cases, the airline is working to accommodate passengers on other flights:
- For domestic flights, passengers will be accommodated on other South African Airways or Mango Airlines flights
- For the Munich flights, passengers will be accommodated on flights via Frankfurt and London
As the airline describes the route cuts:
These decisions are in line with SAA’s usual policy of reviewing flights and consolidating services with low demand. Furthermore, during the current process of Business Rescue, these cancellations represent a responsible strategy to conserve cash and optimise the airline’s position ahead of any further capital investment.
The latter part of that statement is true, while the former part definitely isn’t. I wouldn’t consider it a “usual policy” to consolidate services day-of departure due to low demand, at least for long haul flights. Canceling Munich flights for five straight days is significant.
SAA also says that the Cape Town cuts are due to SAA operating A350s on the route lately to familiarize crews, which has led to surplus capacity.
Despite SAA being in business rescue, up until now we haven’t seen major adjustments to their route network or schedule. Quite to the contrary, the airline has been operating as usual, and has even scheduled their new A350 on the New York JFK route.
Given SAA’s dire situation, it’s not surprising to see them managing capacity in this way short-term. At the same time, that’s not terribly reassuring as a customer, when you have to wonder if your flight will be canceled within days of departure.