Turbulent times already for new SAA

Even before it has taken off, the new SA Airways (SAA) has seen potentially good revenue blasted out of the sky after the US department of transportation refused to renew its rights to operate via various commercial or operational agreements with other carriers beyond its existing direct entry points into the country.

The decision was in retaliation for a South African department of transport refusal to grant US carrier Delta rights to land in Cape Town as part of its Johannesburg-Atlanta service.

ALSO READ: Harith denies involvement in SA Express deal

In 2018 the International Air Transport Association reported that more than 430 000 passengers travelled between the two countries annually, with SAA and Delta the only carriers operating direct flights at the time.

In the continued absence of SAA, United Airlines launches in South Africa next month.

The consequence of the non-renewal of SAA’s rights to operate via other carriers means SAA cannot create or on-sell network tickets beyond its stops in New York and Washington DC, nor codeshare on any other routes into or around the US.

On an SAA ticket, passengers could fly almost anywhere in the US with onward connections provided by US partners. These are the revoked rights and could present a sizeable revenue loss for SAA.

Former head of strategy at SAA Barry Parsons said “there seem some smart people involved” in the Takatso Consortium [which is to take a majority share in the new SAA] but “I hope they have done their risk/reward calculations well, because the government has proved a very unreliable counterparty”.

The US department of transport said it had “raised its concerns at multiple levels and agencies of the government of South Africa”, on the Delta decision, which rests on a reinterpretation of an agreement between the two countries.

“To date, the government of South Africa has offered no meaningful response” beyond stating that their view of the agreement meant withholding Cape Town landing rights for Delta.

The Americans then decided to do the same to SAA. The US government went on to say its attempt to engage “in order to reconcile this matter and vindicate the important US bilateral right at issue have not succeeded”.