South African Airways (SAA) will exit loss-making long-haul routes and concentrate on the “profitable areas of the network” including domestic and regional African markets under the newly-disclosed turnaround strategy for the flag-carrier.
Minister for public enterprises Malusi Gigaba says that under the Long-Term Turnaround Strategy, which will see SAA merge with its SA Express and Mango subsidiaries to become SAA Group Holdings, the airline will build a new network over the coming 18 months that includes “exiting certain routes that will most likely reduce the airline’s operational losses.”
In deliberations with various stakeholders on the route network, he says, it was recommended that SAA should be mindful of “short-term responses to current challenges which may have long-term implications” before deciding to cut particular routes.
Gigaba says SAA had therefore requested assistance in “finalising its decisions” on key routes such as Mumbai and Beijing as these proposals were made “purely on the basis of economic principles while they may also have far-reaching diplomatic implications especially given the strategic objectives of the BRICS countries”.
“It has been proposed that Government should identify all strategic routes irrespective of whether they are profitable or not, and we should develop strategies to address those that are strategic but not profitable,” he says.
The airline also will also need to “sweat its assets both people and structure”, optimise operational efficiencies of strategic routes, prioritise fleet renewal in order to achieve cost savings, he says.
Under the strategy, SAA will focus on being a “world-class premier carrier”, while SA Express operates a regional feeder operation and Mango continues to concentrate on low-cost operations.
He says both SAA and the Department of Enterprise were “mindful” of the need to finalise and approve a new network strategy, which he says, “will invariably have a direct financial impact on SAA”.
Source: Air Transport Intelligence news
