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More recently SAA indicated it is stopping flying to Kigali (it will still sell the route via its codeshare with RwandAir) and Buenos Aires.
Following the Buenos Aires decision the Western Cape MEC, Alan Winde called for urgent meetings with SAA: “Ahead of peak tourism season this is a particular blow. It does not inspire confidence in South Africa’s air access strategy. If we are serious about investment, exports and tourism we need more direct routes, not less…Unfortunately this move by SAA is a major setback to the promotion of increased trade between ourselves and Argentina.”
SAA is also seeking clarity over whether it would have “far-reaching diplomatic implications” if it stopped flying to Beijing or Mumbai (India doesn’t have similar concerns – they operate zero flights to South Africa).
However, equally noticeable have been the route and fleet expansions by Mango Airlines (which recently commenced flights to George), and SA Express which started flying various Airlink routes, and is planning on purchasing 30 more aircraft, in the face of a R25m operating loss over the previous financial year.
The Free Market Foundation on Monday issued a press release mentioning inter alia R24bn financial support for SAA and anti-competitive practices which it says led to the demise of 6 airlines (Flitestar, Sun Air, Phoenix Air, Nationwide, Velvet Sky and 1time). They call for competition authorities to investigate the intended merger of SA Express, Mango and SAA.
Dr Joachim Vermooten, an Aviation and Transport Consultant, says that “SAA losses are constantly being reimbursed by loans guaranteed by government. This effectively shields SAA and SAX from financial disciplines of the market and artificially enables SAA and SAX to stay in business and expand their loss making operations".
"In normal circumstances, SAA and SAX would have to reduce the scale of their operations in line with reduced financial resources (cash) due to the losses incurred.”
Vermooten says that SAA and SAX appeared to be obsessed with growth. “Growth is mentioned 43 times in SAA’s 2012 AFS and eight times in SAX’s 2013 AFS. Yet both SAA and SAX have negative (loss) operating margins. Therefore the more they grow the more money they lose.”
On the private sector side Comair took delivery of 4 new Boeing 737-800s towards the end of 2012, replacing less fuel efficient 737-400s. Comair is taking delivery of a further 4 planes in late 2015 and is also looking at potential further aircraft orders for delivery post 2018.
Meanwhile several private airlines are chomping at the bit to get in on the game – FlySafair (which is busy restructuring), fastjet and Skywise Airline. Skywise is waiting to get its licencing in order, whilst FlySafair and fastjet have been battling against the requirement for 75% local ownership.
- Fin24
*Rob Baker is co-owner of South Africa Travel Online. Follow him on twitter on @southafricaTO.
