SIMON NEWTON-SMITH | SAA reaches for the stars, but keeps its feet on the ground
It looks to align capacity with market demand as it undergoes its rebuilding phase
I was asked somewhat bluntly a while back who would want my job, managing the commercial growth of SAA, something my inquisitor said was akin to keeping the lights on in SA. It is not a difficult answer. For a large part of my professional life, I have been in the aviation industry and a keen observer of success and failure. Despite its recent problems, SAA remains a much-admired brand in the aviation sector and one that deserves a fighting chance. Like many others I have watched what has happened to SAA and frankly it rips my heart out because of the many dedicated and professional people who have been affected. In most instances it was not their fault.
When I got a call from interim CEO Thomas Kgokolo to be part of the rebuild project, I knew I was dealing with a person who wanted to make a difference. Then it was an easy decision. I could be one of those people on the sidelines throwing stones or I could get involved, and here I am.
Domestically SA is a well-serviced market, with a number of excellent airlines, and unless we are strategically selective about the markets we enter, we could find ourselves back in business rescue.
The rebooted version of SAA has only been in operation since the end of September 2021, and it is too soon to ask if we have achieved a turnaround. I understand the pressure. But if we track current performance, based on load factor and revenue, which are the two principle industry metrics, we comfortably on track to achieve our forecasts.
I am also asked if the recent suspension of the Johannesburg-Maputo route or the cancellation of some flights to African destinations over Christmas or New Year is a performance-warning indicator. Nothing could be further from the truth.
Globally the airline market is down anywhere between 60% and 85%, and our job is to make sure we align capacity with market demand. This is standard industry practice. In the case of the Maputo service, market demand has been getting softer, not stronger, requiring the difficult decision to postpone our planned launch. This approach also informs our broader thinking about new routes locally and regionally.
Domestically SA is a well-serviced market, with a number of excellent airlines, and unless we are strategically selective about the markets we enter, we could find ourselves back in business rescue. Our precise modelling is based on historic and future capacity, looking at current pricing, demand trends and competitive environment. If we remove a flight from the schedule or push back routes, it means demand was not emerging as predicted. That is how all airlines work to achieve and protect revenue.
The obvious next question is where are the route gaps for SAA in 2022? Obviously, we would prefer a bigger footprint domestically and, as a leading South African brand, we want presence in all major cities. To that end we are constantly evaluating market dynamics to determine the right time to resume SAA operated service.
Domestic expansion is an important feed into SAA’s growing regional network. To accelerate this opportunity, we have concluded an agreement with Cemair which provides customers convenient “same ticket” access to each other’s networks, including Cemair’s extensive domestic operations. Over time, and at the right time, we will add services and frequencies.
We must also take note of the global picture when it comes to international expansion. The International Air Transport Association (Iata) tells us that Africa’s full recovery will not come until 2025/6, but we are confident that SA will recover quicker than other African markets because it is undeniably a premier destination for both tourism and business.
While SAA may not have immediate plans to fly internationally, we remain a member of Star Alliance and will continue to leverage our strong global partnership which includes Kenya Airways, Emirates, Air Mauritius and LAM. These relationships provide SAA with the opportunity to get its customers and Voyager members to the destination they want to go to, even if the aircraft they are flying in does not have a South African flag on the tail. SAA’s immediate future is also going to depend on a differentiated customer service offering.
Right now, there is much parity when it comes to passenger offering. Our intention over time is to double down on “premium”. We have good airlines in SA, and they are tough competitors that are exceptionally good at what they do. But the emerging model here is low-cost and there is a place for them.
Our job over time is to serve longer-haul markets, using our existing and new partnerships and in future with our own aircraft. For instance, we have customers arriving on our partners’ long-haul flights from Europe, the Americas and Asia who have already had massively long journeys. Providing these customers with the option to connect to onward flights with a true premium seat is important not just for business class customers. There is room for emerging premium products that give economy class passengers a reason to spend a bit more.
I am also asked what will define acceptable success for SAA in the immediate future? It will be achieving an operating profit; establishing a network that touches more major domestic markets with more frequency and serving our major Africa regional points with at least a daily service.
Simon Newton-Smith is SAA’s chief commercial officer.
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