SAA rejects growth obsession allegations

Cape Town - SAA on Wednesday dismissed the recent objections to its policies, with SAA spokesperson, Tlali Tlali, saying that “those behind it are the same individuals who oppose the new entities from joining the industry and operating for they know the consequences. Sadly, this does not in any way serve the interests of the consumers.”

On Monday, the Free Market Foundation released a statement mentioning inter alia an “obsession with growth”, anti-competitive practises which they say led to the demise of 6 airlines (Flitestar, Sun Air, Phoenix Air, Nationwide, Velvet Sky and 1time), and called for competition authorities to investigate the intended merger of SA Express, Mango and SAA.

SAA has clarified that its “strategy does not propose a merger between SAA, SAX and Mango".

"On the contrary it highlights the need to optimise shareholder assets using the individual entities’ strengths. To this end, in whatever we do, we are mindful to ensure that we operate within the competition framework as it applies to single economic entities. We are conscious of compliance with the competition laws.”

The suggestions that Mango had cannibalised SAA’s passenger traffic are “devoid of any truth”, said SAA.

“Both airlines experienced a surge in passenger volumes during 2013 FY. The details will be made public in due course.

"In addition, Mango added capacity in response to passenger demand as a result of capacity withdrawn by competitors. SAA passenger volumes declined on routes where Mango is not active.”

As far as profitability goes, "SAA is set to break even before it becomes profitable. Based on our projections, this will happen in the next three years and profitability will occur within five years.”

“The LTTS (Long Term Turn-around Strategy) is a new flight plan, designed to lead SAA to self-reliance, financially, while at the same time delivering on the developmental State objectives. This involves a delicate balancing act to support our twin mandate.

“Our strategy makes a number of recommendations which we have begun to implement. This follows a process of identification of the big ticket items that have contributed significantly to our poor financial performance over the past years.

"The areas that require attention include fleet and network. We have started to effect changes in these and other areas. We have taken delivery of two new aircraft to start replacing our current narrow bodied fleet.

"We will take more delivery at the beginning of the new calendar year and expect to receive a total of 20 aircraft out of this order. The replacement will ensure that we receive new generation, fuel-efficient aircraft that will contribute towards bringing our operating costs down.

“We have also decided to cease operating on routes that are loss-making. The decision was not taken lightly and was informed by a number of factors including route performance.

"We have considered route profitability from past to current and also taken into account the anticipated future route performance. It follows that routes that have not performed well in the past and do not show reasonable prospects that they could improve in the near future, dictate that we should cease operating from them.

"The routes are important for our network and are significant in ensuring that we return to profitability, a key focus for now,” said Tlali.

*Rob Baker is co-owner of South Africa Travel Online.  Follow him on twitter: @southafricaTO.