It was clear two decades ago that low-cost airlines were the future of short-haul aviation. Since then, we have witnessed low-cost carriers emerge on every continent, with the Ryanair and easyJet behemoths in Europe arguably the two most well-known.
Somewhere since the late nineties, we realised that most of us want to get to our destination as cheaply (and as safely) as possible. High oil prices certainly played a role, as did new generation aircraft which made flights more comfortable, even in the cheap seats. Short-haul Business Class became an extravagance for multinationals and senior government officials only.
Yet, SAA persisted with its dual-class cabins and premium fares on domestic routes, only offloading the Durban-Cape Town one to its low-cost subsidiary in 2010 when it was deep in the throes of what has since become a never-ending “restructuring”. At the time, it made the point that the decision was made as this route was weighted more towards leisure and not business travellers.
The Johannesburg-Cape Town and Johannesburg-Durban routes remained flooded with dual-class cabins. Up until this week, SAA was flying nine return flights a (week) day to Durban and as many as 16 return flights a (week) day to Cape Town! It is completely unfathomable how this continued for this long.
That SAA thought it prudent to run 112 return trips per week to Durban (that’s almost 500 a month) for a 45-minute flight is absurd. It simply cannot be profitable on a sustainable basis. This route should arguably not even be such a busy one – it is far more suited to a high-speed rail link (but that’s a story for another day).
SAA does not need to operate premium services on domestic routes, where the longest flight time is two hours. This much is obvious, and has been for some time.
Now, while SAA was five years late to the low-cost airline game (it launched in 2006, with Comair’s Kulula taking off in 2001), it should be beating Kulula at its own game.
Reading between the lines of the late December announcement that SAA would be ceding a large number of its Joburg-Durban and Joburg-Cape Town flights to Mango, it was clear that SAA could not operate these profitably. Or, if one wanted to be a little more charitable, that Mango could operate these more profitably than SAA.
New SAA chief executive Vuyani Jarana seemed to confirm this to Rapport this weekend, saying “We simply can’t afford to compete with low-cost airlines by trying to operate planes on routes that are not profitable”.
The game has changed. Kulula forced this change, but others such as FlySafair (and yes, Mango!) are capitalising on it in the market. Why would any sane person pay R2 000-plus for a one-way flight to Cape Town when one is available for R800?
For most of the middle class globally, air travel is now a commodity.
The problem for SAA – and one that it’s been saddled with for a decade – is that its low-cost strategy did not go far enough.
It was right to set up Mango as an independent subsidiary, freed from the constraints, convoluted supply agreements and high labour costs of its parent. But, Mango should’ve taken over all of SAA’s domestic routes in less than five years.
Extravagances, such as the dozens (hundreds?) of free flights gifted to parliamentarians, their spouses and children, and the business class tickets for ministers, as well as freebies doled out to (qualifying?) SAA retirees ought to have been scrapped years ago. A side-effect of a move to change these rules is that Comair’s British Airways operation would’ve suffered too (it benefits from government travel, too). But, there are sane ways to make economically-rational decisions without being hauled to court.
Mango should be SAA’s domestic carrier, full stop. Its existing codeshare agreement with SAA will ensure there is more than enough additional demand. Smaller regional routes that can’t be operated profitably by SA Express or Mango should be privatised (many of these have effectively been ceded to Airlink). If any of these are strategic in nature and will likely be loss-making (i.e. there absolutely have to be flights), the routes should be subsidised directly by government (national or provincial, depending on who deems this so utterly necessary).
That leaves SAA to focus on being a regional and long-haul airline. And while, for political reasons, it holds monopolies on many routes on the continent, it should focus on ensuring that it operates these as efficiently and competitively as possible.
On the long-haul side of the equation, competitors have mopped up millions of passengers a year on routes that SAA either flies, could fly or used to fly. There is no rational reason why dozens of European airlines (including those effectively chartered by tour operators) run direct flights to Cape Town in the summer tourist season.
And, the bulk of South African tourists now get to European (and other destinations) via Dubai (Emirates), Qatar (Qatar Airlines), Doha (Etihad), Istanbul (Turkish Airlines) and Addis Ababa (Ethiopian Airlines). Yes, we’re 10 000km from anywhere, but there is still significant demand on many of these routes. A lack of strong codeshare partners in Europe didn’t help matters. Remember, this is an airline that used to fly to Amsterdam, Lisbon, Paris, Rome, Milan, Vienna, Athens, Tel Aviv, Singapore, Taipei, Dubai and Beijing.
Running SAA as a long-haul (and regional) airline is a perfect fit with government’s logic for wanting to keep a national flag carrier: the almost unmeasurable branding value it brings. Sure, there are arguably better ways of achieving this but it is unlikely the state’s prevailing worldview will be changed.
It can and should succeed on long-haul routes: Beat the competitors on service and quality, especially as many of them rely on aging fleets to service Johannesburg and Cape Town. We used to be competitive!
The change announced in December, which will be largely complete next month, gets SAA halfway there. Already, Mango exclusively operates all Lanseria capacity (to both CT and Durban), as well as routes focused on leisure travellers (Jhb-George, Jhb-PE, CT-Durban, CT-Bloemfontein, Jhb-Zanzibar). With the “rationalisation” from February, around 330 domestic return flights a week will be operated by SAA, versus marginally more by Mango (excluding Zanzibar).
Politics (including all the associated corruption, backstabbing and skulduggery) and a clear lack of strategy are why SAA is in this mess. Hopefully Jarana has the vision and enough political backing to push this move on domestic routes through to its logical conclusion.
It’s not too late.
Hilton Tarrant works at immedia. He can still be contacted at hilton@moneyweb.co.za.
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