SAA has no plans to invest more in or increase its domestic route footprint as it focuses on more profitable regional and intercontinental routes.
Board chair Derek Hanekom told Business Times the airline — which this month turned a profit for the first time in more than a decade — is looking at increasing its flights to Sao Paulo and Perth, which have proved more profitable than domestic routes.
The airline is also adding more African destinations and increasing the frequency of flights to existing ones. It is in negotiations to have a direct flight to China.
Hanekom believes local carriers such as Flysafair and Lift are best suited to running shorter domestic journeys than SAA whose widebody aircraft perform better over longer distances.
He said Johannesburg-Sao Paulo, Cape Town-Sao Paulo and Johannesburg-Perth are the three operational intercontinental routes.
He said the profitability of these routes surpassed expectations. “What I need to say about both the Sao Paulo and the Perth flights is they have, in a big way, exceeded our expectations. Which also speaks well of management, that they’re quite prudent. They don’t get overzealous and overenthusiastic, they look at the routes very carefully and, if anything, they’d prefer to err on the conservative side.”
Hanekom said SAA would take “no joy” if Flysafair was to be grounded because of the battle over its ownership, as SAA would not be able to fill the gap. “We would take no joy at all. But at the same time, we’re having informal discussions with Flysafair to say, look, if the worst comes to the worst, how do we support each other?”
South Africa’s International Air Services Council has ruled that the shareholding structure of Flysafair is not legal — a decision that could end in a sanction that affects the airline’s ability to operate.
Both the Sao Paulo and Perth flights have, in a big way, exceeded our expectations
— SAA chair Derek Hanekom
Hanekom said regional African routes were extremely profitable for the airline and there were plans to add more, including a direct flight to Dar es Salaam, Tanzania, in January, and increasing the frequency of flights to Accra [Ghana], Lagos [Nigeria] and other popular regional destinations.
SAA is also pursuing talks with a Chinese company over how to service that huge market, which could include agreements about aircraft leasing. “We cannot go into the details, but there’s a strong likelihood our first flight to China will happen next year,” said Hanekom.
“It’s not in our plans, strictly speaking, because this is the product of quite intense discussions we’ve had with the Chinese company over the past few months, and that will be achieved not because we have the necessary capital to get the necessary aircraft, but because of the nature of the partnership we’re discussing.”
SAA, which was on the brink of collapse a few years ago, surprised everyone when it announced it had turned a R252m profit from a R1bn loss the previous year. The state-owned airline also reported a 183% revenue increase from R2bn to R5.7bn. It was also on the brink of selling a 51% equity stake to the Takatso Consortium, a deal that has collapsed.
Hanekom said they were still open to an equity partner as long as the state keeps majority control. “We knew it from [late public enterprises minister] Pravin Gordhan, we’ve heard the MPs speak, we as the board and management of SAA and the [transport] minister are not interested in selling a majority share to just any investor. “So any investor who may come in would take a share but certainly not a majority.”
The turnaround in SAA's fortunes added R9.1bn to the country’s GDP in the 2023/24 financial year, and is projected to add R32bn to the economy by 2029/2030. The board expects further profit increases over the next three financial years as the airline continues to grow green shoots.
“Though they’ve not yet gone through the audit, we know what we submitted, and in the 2023/24 year, the profit will be even higher than in 2022/23 year. So we're still talking about modest — but increased — profit. And I think the big question is, is this sustainable now as we have a second year of profit? [With] a profit, the financial sustainability becomes more evident ... we’ve turned the corner,” said Hanekom.
“The year isn’t over yet but we're confident that year after year we are showing a profit, and they are increasing. Where we were even six months ago and where we are now is so different. The banks were a bit reluctant, now the attitude is so much more positive.”
Hanekom said SAA had started rehiring employees with critical skills who had to be retrenched when the national carrier was in trouble and entered business rescue. Staffing has increased from about 800 to 2,000.
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