South African Airways is cutting jobs and routes as part of a drastic restructuring that could also lead to spinning off non-core units such as maintenance.
The Star Alliance carrier says it will submit to its board in May a new business plan that will position SAA for a return to profitability. "Although we are running load factors of 85% and 90%, passenger numbers are growing and revenue is on track, operating costs remain a challenge," SAA says. "We are lagging our competitors, who run operations of similar size with fewer people."
SAA has not yet decided how many of its 10,500 employees to retrench, but has informed unions that cuts will be made. The carrier unveiled plans for up to 1,000 job cuts at the end of November, after revealing a 652 million rand ($92 million) loss for the six months ending 30 September.
SAA is also re-examining its entire route network. It already has postponed plans to launch services this year to Buenos Aires and Chicago and has ceased serving Zurich. "Our business plan following restructuring will indicate whether others (route cuts) will follow," SAA says.
The government-owned flag carrier is also re-examining its long-haul fleet and whether to phase out its Boeing 747-400s. Last year it reduced its 747-400 fleet from eight to six and another aircraft is due to be returned in June.
The new business plan could follow Air Canada's model of spinning off non-core units. "We are looking at the possibility of ring fencing our subsidiaries into their own standalone companies as a measure to control accountability," SAA says.
Meanwhile, privatisation plans have been shelved until at least 2010. Over the years SAA has gone through several financial bail-outs and restructures, including a cost- and job-cutting exercise in 2005.
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Source: Flight International
