After a radical restructuring, South African Airways (SAA) has claimed it is again profitable just as the South African Government confirmed the timetable for its privatisation.
The corporatisation of SAA as a separate entity will be completed by the end of March. Privatisation is on schedule for mid-June with final bids set for 31 May. Lufthansa/Singapore Airlines and a bid by Swissair/Delta Air Lines are the frontrunners.
Chief executive Coleman Andrews says he has stemmed losses - R323 million ($53.8 million) in 1997 and R300 million in 1998. He says SAA is profitable, although it will lose about R137 million for the financial year ending March 1999.
In the nine months since Andrews took control, SAA has restructured top management, axed unprofitable routes, improved on-time departures, lowered fares, improved customer service, reduced staff by 10%, begun an ongoing fleet upgrade and broadened international alliances.
In the six months from October 1997 to March 1998, SAA lost R106 million, but the airline will make more than R110 million for the same period in 1998/9, says Andrews. SAA will save R200 million annually through the elimination of most of its stopover flights which incurred punitive ground-handling and landing fees; the reduction in outstation costs, including several closures; and the cheaper procurement of spares through alliances.
Andrews' changes have been sweeping. The airline will shed nearly 10% of its staff - about 1,100 - by April through voluntary or enforced retrenchment. The cost of this will run to "eight figures", says Andrews.
He has also promoted younger SAA managers to top executive posts and brought in international talent from the USA, Canada and Switzerland. New software will boost load factors and yields.
There has been a marked improvement in on-time departures. "This has brought the business passenger back. Domestic departure times have improved from lows of between 70% and 80% to well above 90%." says Andrews.
He adds that the matching of competitors' fares, which sparked complaints from domestic competitors, has dramatically increased SAA's domestic passenger numbers from about 60,000 a month in July-August to 80,000 for October-November last year.
International load factors have also increased through a revamp of schedules and improved on-time departures, with rises of 12-13% between October and January and a slight increase in yields.
The new codeshare agreement with Swissair has added 30 passengers a flight to services from Zürich. Similar benefits are expected from codeshares with SIA, Lufthansa and British Midland.
Source: Airline Business
