JUSTIN WASTNAGE / JOHANNESBURG
Flag carrier South African Airways (SAA) enjoyed statutory protection until 1991, when the government deregulated air services. A long-hoped for liberalisation of the southern African region's market has yet to materialise, and the nation's carriers are running out of room to grow.
South Africa's open skies policy is among the freest in the world. Anyone can enter the market and operate on any route, subject only to safety, insurance and financial requirements. Thirteen years into a deregulated market, SAA's total share of the domestic market has been reduced from around 95% to around 55% today, says Pieter van Hoven, managing director of the British Airways franchise partner Comair that has been a major beneficiary of the deregulated market. There have been casualties too; FlightStar, Phoenix and Intensive Air have all left the market and SunAir has re-invented itself as a bus- iness-class-only shuttle. Comair's BA brand and Nationwide remain the largest private airlines, with Comair low-fares spin-off kulula.com taking as much as 12% on trunk routes such as Johannesburg to Cape Town.
BA and SAA earn much of their revenues from onward services from Johannesburg to points in southern Africa. Yet route expansion is held up by restrictive air services agreements between South Africa and its neighbours, says van Hoven. "We've seen little evidence that governments will implement the Yamoussoukro [pan-African open skies] accord," he says. Mozambique has recently become the first country to partially open up routes, with licences granted to Charlans Air to operate from Johannesburg Lanseria to three secondary cities, but other countries are reluctant to follow, fearing damage to state-owned flag carriers. Lihnas Aéreas de Moçambique and SAA are still the only carriers designated on major routes, says van Hoven.
Kulula.com is also interested in flights to neighbouring cities, as points in southern Mozambique, Namibia, and Zimbabwe are all easily reachable tourist destinations and business centres, says Gidon Novick, the carrier's commercial director. Kulula.com has no plans to extend its route network past the country's five major metropolitan areas, despite the planned entry into the market of a second low-cost carrier, 1Time, in January. Novick says: "The market is not big enough to support several tiers of low-cost carriers." However, over 50% of kulula.com's traffic is business travellers and it has re-introduced assigned seating "to enhance the airport experience" and offers corporations bulk discounts in efforts to attract business traffic. To reduce operating costs the carrier recently exchanged its Boeing 737-200s for Boeing MD-82s and is considering a move to secondary airports, says Novick.
With a lack of movement on regional routes, some operators are looking further afield, with Nationwide launching leisure services to London Gatwick and planning flights to Germany and the Netherlands. Last year SAA recorded passenger figure growth of 6.5%, its sixth successive increase.
SAA, which recorded over 30 years of losses, turned in a full-year operating profit of R545 million ($83.6 million) last year. During the apartheid era, countries such as Australia and the USA severed air links and the airline has spent 10 years re-establishing its routes. SAA is reacting to the challenge of long-haul competitors by introducing more efficient aircraft. In mid-2002, the carrier ordered nine Airbus A340-600s and became the launch customer for the A340-300 Enhanced with an order for six, to replace its ageing Boeing 747 Classics and two of its 747-400s. SAA has an average load factor of 68% and the strategy is to deploy the A340s on thinner, more frequent routes and retain the 747s for Asian and US services.
René Marais, manager, avionics and mechanical systems engineering for the SAA division that is implementing the fleet roll-over, says the company learned lessons from the earlier renewal of its short-haul aircraft with 21 Boeing 737-800s, which was the "first in SAA history". He adds: "Airbus said it had never seen such a thorough entry-into-service plan."
SAA now plans to take 11 Airbus A319s and 15 A320s from 2005 to replace its Boeing 767s and 737-200s ahead of anticipated Chapter 3-equivalent noise rules.
Marais says the airline will use spare labour capacity created from reduced maintenance and training costs created by fleet commonality to service third parties, reducing risk. SAA has a goal of 40% external clients for overhaul and training by 2005, he adds.
Source: Flight International
