Tough decisions needed to make SAA viable

Wednesday, November 27, 2019

Tough decisions will need to be made in the immediate to turn South African Airways into a viable airline. 

Public Enterprises Deputy Minister Phumulo Masualle said this in the National Assembly on Tuesday when he participated in a debate on the recent strike at the national carrier. 

The debate took place a few days after the airline and unions reached an agreement that ended the crippling week-long strike. The strike, which saw many SAA flights being grounded, leaving passengers in limbo, came to an end after parties reached a wage deal of 5.9% against a demand of an 8% salary increase. 

“The department believes that the recovery of the airline is possible and this can be achieved within the parameters of the fiscal support already on the table. This will require a determined, concerted effort across the board. This, of course, can ensure that jobs are reserved to the extent that is necessary. 

“This requires that we act together and it is true that very tough decisions in the immediate need to be made. However, as we do so, it should be that everyone who matters, and ultimately the public, is taken into confidence about measures that are made to conclude this matter so that we have a viable airline,” Masualle said. 

SAA faced with headwinds 

Masualle acknowledged that SAA has been financially and operationally challenged for many years - both as a result of external and internal challenges. 

He said globally, the aviation industry is characterised by very thin margins, even among the best performing airlines in the world. 

“Compounding the challenge are high costs relative to revenue, inefficiencies, low productivity and poor management decisions that have been made, which also contributed to the multiplicity of the challenges the airline has.” 

Masualle said it was undeniable that for the airline to compete effectively - and to cease being a drain on the fiscus - it is imperative that SAA should be turned around and be made fit for purpose. 

SAA has reviewed its turn-around strategy 

Masualle said during the course of the year, SAA has reviewed and updated its turnaround strategy to take account of the challenging external competitive environment, as well as progress in the implementation of the strategy. 

Firstly, the airline has obtained approval for the lease of four A350-900 aircraft to be utilised on their long-haul routes, including Frankfurt and Hong Kong, which are expected to reduce fuel usage and maintenance costs, and boost revenues. 

The old fleet was, according to Masualle, fuel guzzlers and costly to maintain. 

Secondly, the airline has concluded its organisational redesign exercise, which is aimed at streamlining operational and decision-making processes and improving productivity. 

“It has also initiated the mandated consultation process to give effect to that redesign. The invoking of the provisions of the Labour Relations Act, in pursuit of the restructuring that should take place, has already been introduced to the stakeholder community within the airline,” Masualle said. 

The airline has also reviewed contracts with its top 20 vendors - the so-called evergreen contracts - that the airline had committed to. 

The 20 vendors collectively account for just over half of the company’s total spend. The airline is implementing these initiatives to reduce costs. 

“Thus far, over R500 million has been saved in these efforts. In addition, it has reformed procurement processes to strengthen government and eliminate corruption. A new CEO has been appointed at SAA Technical and other key positions are being filled. 

“Procurement issues are being addressed and the airline is ensuring compliance with the regulatory requirements of the Civil Aviation Authority,” said Masualle. –