It’s been a turbulent time for South Africa’s flag carrier in recent weeks. South African Airways (SAA) has been bleeding money while at the same time dealing with strikes by some of its unionized workers. Now, the South African government will reportedly undergo an extensive restructuring of the airline to save it from bankruptcy and collapse. This is according to reports emerging in the past few days.
According to FlightGlobal, South Africa’s department of public enterprises says that the recent strikes by SAA workers have caused “immense damage” to the carrier and is reputation. In fact, the already poor financial situation has been made even worse. This is what the government department had to say:
“SAA therefore, cannot continue in its current form…The airline group will now go through a radical restructuring process which will ensure its financial and operational sustainability. There is no other way forward…The [government] is committed to a viable, sustainable, profitable national airline. It is our collective responsibility as South Africans to support SAA in its efforts to restore sales confidence among its customer base and rebuild revenues in the shortest possible time.”Advertisement
So far, no details have been offered by the department of public enterprises – only that “various options” are being considered. However, the airline has been in discussions with its creditors in order to keep operations going.
The biggest challenges for SAA
From our point of view, there are a few external forces that work against SAA.
Firstly, the country’s geography and position ‘on the edge’ of the world means that it is unlikely to receive as much connecting traffic when compared to most other airlines. As a result, those flying on SAA to South Africa are passengers that have the country as their final destination. With many other airlines in Europe, North America, Asia, and the Middle East, connecting traffic is a huge factor in passenger numbers. Unfortunately, this is not the case for SAA – and it can’t do much about it.
Secondly – and somewhat connected to the first point – the airline faces a lot of competition from other airlines. European carriers can connect North American travelers to South Africa. The Middle Eastern carriers can do the same with passengers from Europe, Asia and Oceania. And of course, we have to point out that fellow Star Alliance member Ethiopian Airlines has been expanding rapidly and is grabbing a large portion of the African market share.
These are certainly strong headwinds that SAA faces on its path to financial sustainability.
It will be very interesting to see what restructuring looks like and if it will trigger more unrest among SAA employees. Cuts may be necessary but workers will undoubtedly fight this.
What do you think SAA needs to do to become profitable again? What do you think are its biggest shortcomings? Let us know by leaving a comment!
We reached out to SAA for comment. However, no response was received before this article was published.