Cash-strapped South African Airways (SAA) has announced it will be implementing a strict turnaround strategy to return the airline to profitability as soon as possible. The airline has until now heavily relied on state funding, but South Africa’s Finance Minister Nhlanhla Nene recently indicated that this would have to stop and that the airline would need to start living off its own balance sheet.
The financially embattled airline turned to the Treasury for a bailout of more than $400 million two years ago, a move that sparked massive outcry from the competitors of SAA. Despite the government’s help, SAA has continued to post considerable losses. The airline reported an after-tax loss of about $95 million for the year to March 2013, which was 39% higher than 2012’s loss of roughly $72 million.
SAA’s financial woes have led to unrest within the management and board of the airline, which eventually culminated into the suspension of SAA’s CEO Monwabisi Kalawe in November this year. The airline was also moved from the Department of Public Enterprises to the Treasury and Nico Bezuidenhout (CEO of SAA’s low-cost unit Mango) was appointed as acting CEO.
Immediately after his appointment, Bezuidenhout announced a 90-day rescue strategy to the government that includes 1.3 billion rand ($113 million) in annual savings and a review of some long-haul routes.
SAA also announced a major expansion of its strategic partnership with Etihad Airways, marking a new era of cooperation between the two national flag carriers. As part of the extended cooperation, SAA will launch a daily service between Johannesburg and Abu Dhabi on March 29, which will complement Etihad Airways’ existing flights between the two cities to offer a combined double-daily frequency on the route.
The airlines have also significantly
developed their codeshare agreement to include a total of 49 routes, more than
double the previous number. Subject to regulatory approval, Etihad Airways will
place its EY code on SAA’s new Johannesburg-Abu Dhabi flights, in addition to
16 of the airline’s other services from Johannesburg to key destinations across
the African continent. In return, South African Airways will place its SA code on 32
Etihad Airways routes beyond Abu Dhabi to a range of destinations worldwide.
In addition, the airlines will
enhance the alignment of their Etihad
Guest and Voyager frequent flyer programs, with even more opportunities for
members to earn and redeem miles. Benefits such as priority baggage handling,
boarding and check-in as well as airport lounge access across the airlines’
networks will be provided based on membership tiers.
SAA also has upped frequencies to some of its key African routes, boosting
frequency between Johannesburg and Maputo, Mozambique, from 17 to 21 a week and
between Johannesburg and Harare, Zimbabwe, from 18 to 19 flights a week. In
addition, flights between Johannesburg and Kinshasa, Democratic
Republic of the Congo, have
increased from six to seven a week, and service from Johannesburg to the island
of Mauritius has gone from nine to 10 a week.
“The strengthening of these routes
comes in the wake of positive load factors and increased traffic between the
countries,” Bezuidenhout said.