Well, that escalated quickly…
South African Airways has been in a terrible financial situation for a long time. While South Africa should be a big aviation market, the airline has an inefficient fleet and route network, has been losing money for nearly a decade, and there are many reports of corruption and mismanagement. In fact, the airline has gone through five CEO’s in the past 8 years. In other words, they’re a hot mess.
THE BAILOUT(S)
In early 2019, the airline received a huge cash boost of R5.5 billion (US ~$3.7 billion) from the government, adding to numerous bailouts over the past several years, but is nowhere near operating at a profit.
THE STRATEGY
In June 2019, the airline announced they would be receiving two new A350-900 jets and, in an attempt to make their fleet more efficient, would be utilizing the pair to operate SAA’s ultra-long-haul routes between Johannesburg (JNB) and New York (JFK) despite being cash strapped.
They followed through on their decision to fly the new 350’s to NYC as I wrote about it three days ago.
However, since that announcement 72 hours ago, SAA has been in the news for all the wrong reasons.
WHY THE DRAMA!? JUST BE HONEST!
Just after the announcement on January 19, media reports began to surface that the airline would cease operations soon.
On January 20, SAA issued a press release assuring “customers and stakeholders that flights to all destinations continue as normal.”
On January 21, SAA issued another press release stating they were “in the process of consolidating selected domestic flights between the airline’s main hub.”
CONSOLIDATION = CANCELLED
So, what flights has South African Airways cancelled? Let’s take a look…
- Between January 20 & 24, the airline has cancelled up to two daily flights between Johannesburg and Cape Town
- Between January 20 & 23, the airline has cancelled up to three daily flights between Johannesburg and Durban
- Between January 20 & 25, the airline has cancelled daily nonstop flights between Johannesburg and Munich
In all cases, the airline is working to accommodate passengers on other flights:
- For domestic flights, passengers will be accommodated on other South African Airways or Mango Airlines flights
- For the Munich flights, passengers will be accommodated on flights via Frankfurt and London
FINAL STAMP
I trust it is difficult to run an airline but, as with any business, critical decisions have to be made.
I hope SAA has calculated the numbers here because if history tells us anything this could be a dangerous decision for the airline.
I understand the concept behind consolidating services, however, consolidating services on the day-of departure is radical and cancelling Munich flights for five straight days is NOT insignificant.
Additionally, under European law, if your flight has been cancelled or delayed you have the right to compensation. Under EU Regulation 261/2004, passengers are entitled to up to €600 (£534) in compensation when their flight lands at their destination more than three hours late.
SAA will be on the hook after passengers file their complaints with the EU over the Munich flights.
The government is between a rock and a hard place. Do they continue to inject money into an airline that has an inefficient fleet and route network, and has been losing money for nearly a decade? Or do they let the airline go out of business?
Something to consider: Although the airline may not be profitable, it may still be a net-positive for South Africa (the country) in terms of the access it provides to the country, and the corresponding positive economic impact.
What would you do if you were the government? Do you think this is “business as usual” and SAA will continue with the same actions that it has exhibited in the past?
1TattedPassport 