SAA sets to shrink way to profitability, consolidates on Nigerian route
- Gets $736 million bail out funds, plans three years turnaround
The Chief Executive Officer of troubled South African Airways (SAA) Vuyani Jarana said the Nigerian route and most of its high yield routes would be developed more as the carrier begins a turnaround project that would again return it to profitability.
He stated that Nigeria with a population of about 180 million people is key to their market and one that should not be joked with. He disclosed that the carrier has airlifted 1.5 million passengers on the Lagos-Johannesburg route in 20 years.
He stated that the firm is striving to return to profit in three years by reducing the size of the network and transferring planes to its low-cost carrier as his team embarks on a recovery plan.
Speaking to Woleshadarenews at a breakfast meeting held in Lagos at the weekend, the airline chief who was in Nigeria to meet the airline’s partners, officials of the Nigeria-South African chamber of Commerce and policy makers on how to re-strategise for growth said he was delighted with the progress the carrier had made in the market.
His words, “I am delighted with the progress this market is making. We have to maintain growth despite the pains and challenges in terms of our portfolio. Our restructuring is about four issues. One, we need to look funding structure. Secondly, we need to look at commercial as well as aspect of the business to make sure there is no mismatch in terms of balances and losses”.
Jarani who became SAA’s first permanent CEO in three years when he started work in November 2017 equally disclosed that the airline got R9.2 billion ($736 million) for restructuring of its operation and to stop the bleeding that had characterised the airline for many years.
A turnaround of the state-owned airline is among the more urgent priorities of newly appointed Finance Minister Nhlanla Nene who is seeking to avoid a repeat of the government bailout approved by his predecessor Malusa Gigaba last year.
The carrier’s net loss widened more than threefold to R5.6 billion ($473 million) in fiscal 2017.
“We now have a clear strategy and clear path to profitability defined by the board. We are looking at a three-year window to get to a break-even point. We continue to revise the strategy as we see more opportunities.”
He noted that SAA will continue to cut or reduce loss-making routes and transfer unneeded planes to profitable low-cost carrier Mango Airlines.
The company halved the number of flights from Johannesburg to London’s Heathrow airport last month, and in 2017 cancelled or reduced the frequency of flights to African capitals including Luanda, Abuja and Kinshasa.
Ohis Ehimiaghe, Regional Manager, North, West and Central Africa; Vuyani Jarana, Chief Executive Officer and Pumla Luhabe, Chief Commercial Officer all of South African Airways during the South African Airways CEO press briefing in Lagos.
Ohis Ehimiaghe, Regional Manager, North, West and Central Africa; Kemi Leke-Bamtefa, National Sales Manager; Vuyani Jarana, Chief Executive Officer and Pumla Luhabe, Chief Commercial Officer all of South African Airways during the South African Airways CEO press briefing in Lagos.
South African Airways team with Nigerian media during the South African Airways CEO press briefing in Lagos.
The airline has a fleet of more than 50 planes and flies to cities in 25 countries, according to its most recent annual report.
The airline has been losing money for years, and their losses keep getting bigger, with no signs of that changing.
The airline has an inefficient fleet, an inefficient route network, and there are also reports of a lot of corruption. The airline has gone through seven CEOs in the past five years, which gives you a sense of the situation they’re in.
But all that appears to go away as the airline is poised to return to profitability in 36 months.
He explained that a new investor would “most likely be attracted to an SAA that’s actually dealt with its own challenges and restructured.
On how to serve the West African market, Jarana said before the restructuring, “we were in about nine countries in West and Central Africa, starting from the Democratic Republic of Congo to Senegal and so on. We had Dakar, Abidjan, Cotonou, Brazzaville, Kinshasa, Lagos, Abuja and so on. We used to be airlines to these cities because of the restructuring and after looking at the routes which were not profitable, we suspended them”.
“With the restructuring, we have had to restrategise. We have pulled away from Cotonou, Congo Brazzaville, Doualla for now but that does not mean we will not go back once we get the right equipment, good market, we will go into them. You will also notice that we have consolidated on our operations trying to make ease of travel better for West African travellers. So, what we are doing is, we are partnering with regional carriers like Africa West Airline to feed our operations be that in Lagos or Accra”, he added.
He hinted that there is the need to take hard decisions because and need to change total perception of SAA, stressing that they have to optimise revenue.
