South African Airways Suspends International Flights

Filed Under: South African Airways

At this point a bunch of airlines are either greatly scaling back flights or suspending operations altogether. Well, there’s something that makes South African Airways’ announcement today interesting, given the company’s financial state.

SAA suspends all international flying

South African Airways has announced plans to immediately suspend all international flights through May 31, 2020.

This is in response to a government travel ban aimed at stopping the transmission of COVID-19. Specifically, South Africa has banned the entry of foreigners from high-risk countries, meaning lots of tourists would be prohibited from entering the country. While tourists from some countries are still allowed, the list of banned countries could obviously change.

South African’s service to “high-risk” countries includes:

  • The United States (SAA flies to New York JFK and Washington Dulles)
  • The United Kingdom (SAA flies to London Heathrow)
  • Germany (SAA flies to Frankfurt and used to fly to Munich, but has suspended that route)

SAA’s other intercontinental destinations include Perth and Sao Paulo, and those flights are canceled as well, even though the countries aren’t considered high-risk by South Africa. Furthermore, all intra-Africa international flights are canceled as well.

As SAA’s Acting CEO, Zuks Ramasia, explains:

“In support of efforts by government to deal with this pandemic, and in the best interests of our crew, passengers and the public, we have decided to suspend all international flights until 31 May 2020. It is all our responsibility, not just government, to curb further transmission of the virus. In addition, the increasing risks to our crew of contracting the virus including the possibility of being trapped in foreign destinations as a consequence of increasing travel bans cannot be ignored.

We also recognise the fluidity in the conditions we operate in and the need to respond to these changes with speed, to this end we commit to keep all our stakeholders abreast of any changes on an ongoing basis.”

Could the current situation help SAA?

When this whole situation got really bad, I assumed that this would put a lot of already unhealthy airlines out of business. After all, if they couldn’t make money in good times, surely this would be the end of them. But more or less the opposite has happened.

Alitalia is being renationalized. Norwegian is getting government funding. And the coronavirus situation is… actually helpful for SAA?!

In late 2019 SAA entered business rescue, as the airline had been losing money for many years, and simply put, was out of cash and on the verge of liquidation. With this, the company was taken over by an administrator who was tasked with turning the business around, and if that’s not possible, minimizing the loss to stakeholders.

About a week ago, one of SAA’s administrators argued that this situation might actually be helping the airline. Why?

  • A decrease in international flying by all airlines would decrease the cost to lease jets, making it easier for SAA to renegotiate lease terms on planes
  • Oil prices are crashing, which lowers fuel costs, one of the biggest operating costs for the airline

As the administrator explained:

“The coronavirus issues and the impact on the industry means that a lot more lessors are going to find themselves with a lot of aircraft. At a risk of being too much of an optimist that’s a silver lining for our renegotiation of aircraft.”

Personally I think that’s an optimistic perspective, but I also don’t want to dismiss what the administrator has to say…

Bottom line

SAA is canceling all international flights for over two months. This comes shortly after SAA had four A350s join their fleet, so the timing of that isn’t exactly ideal. SAA has been trying to sell several A340s, and I imagine the demand for those is even lower now.

In general I do find it interesting that an airline on the verge of liquidation, like SAA, is somehow taking a positive view of their future in light of this situation. I guess SAA probably loses money with every international flight, so maybe they’re no worse off not operating flights. But they are making a lot of lease payments on planes…

What do you think — will this slump finally kill SAA, or will it actually help the company, somehow?

Comments
  1. If you read between the lines. There are politics involved. Many times flag carriers are forced to operate unprofitable routes. I guess this is the best excuse to operate more efficiently. As far as leasing airplanes will be cheaper, they just got the A350 I doubt they can cut be better deal anytime soon for a new modern type. Maybe their older A332, but those should be returned not renewed given the current situation.

  2. One should talk to their pilots. The business rescue administrator is sacking their senior pilots, most of whom are white. In a case of reverse discrimination (apartheid), a two or three year minority pilot would usurp the seniority of the most senior white captains & first officers to fly routes on larger aircraft. This is in direct conflict of the seniority program stipulated in the pilot contract & common practice among all other airlines. Thus, a minority pilot would push a senior white pilot down the seniority list. Minority pilots who are already flying for SAA would move up the list. The government who makes up the rules for the state owned airline agrees. The SAA pilots would rather the airline close business for good than to jeopardize the safety of the flights and give up their hard earned seniority. Someone do the math and figure out how a “bankrupt” airline can afford new Airbus A350s! Something stinks and it ain’t fish!

  3. This could be a godsend opportunity to shut down every thing for a few months and reorganise the organization under the guise of COVID-19. When this all over come back leaner and meaner and only focus on routes that will make money.

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