Business

Will west Africa give SAA the boost it needs?

2018-12-19 00:00

SAA’s CEO, Vuyani Jarana, has his sights set on acquiring new business in west Africa.

Excited at the prospect of gaining access to Nigeria’s 190 million-strong population, he says this market could boost South Africa’s domestic travel and improve networks, which would give the beleaguered airline a boost.

“We are planning to gain access to fifth freedom rights in order to fly from Nigeria to the US. If we cannot get the rights, we will have to look at other instruments,” Jarana told City Press.

“We at SAA should be able to put our metal in Lagos, and then fly to the US or the UK and capture that market.”

Currently, SAA’s travel rights only allow the national carrier to stop over in Lagos; it does not have permission to pick up passengers.

Regarding the international market, Jarana said SAA was looking to optimise the use of aircraft on routes to and from London, where, as things stood, “an aircraft lands in the morning, waits for the full cycle to fly in the evening – and we have about 11 hours where the aircraft is on the ground, and you are paying leases for that”.

“So, we are working on changing the schedule to explore a number of things in terms of optimising the use of the aircraft,” he said, adding that SAA would look at “doing European charters for daytime before you go back to pick up customers in the evening”.

He cited a recent test case in which Liverpool fans chartered an SAA flight to take them to a Uefa Champions League match, resulting in the airline “doing 16 cycles of flying, moving people around – and we made money”.

“It was a classic case and when we tested it out, we saw that this thing could work. Profitability could change and [if so], you sweat the asset even more.

“A daytime flight is going to be a reality. All of sudden, you will see an improvement on SAA’s profile.”

However, said Jarana, his biggest challenge was entering the “overtraded” Hong Kong and Asia-Pacific market, which was the only gateway to Asia and the Far East.

He said he was “looking at other ways to get in there”.

“While we are fixing ourselves internally, we have not lost sight of opportunities in the market – because the market does not wait, and by the time we finish fixing ourselves, the market will have moved.”

Jarana added: “The SAA brand is strong. It is liked internationally and we are getting awards globally for our on-board service.”

Nevertheless, he said, “we cannot be complacent. We have to transform a lot more and we need to focus more on customer experience. But the brand is standing its ground amid all the noise that is happening in the market.

“So, that gives us a lot of strength. We are strong in the US and in the UK.”

What SAA needed to fix, he stressed, was its cost structure and operating model. “That is where we are now. If you ask me, coming from outside the industry, SAA is not behind its peers globally. It is not a huge catch-up.”

He said the opportunity was available, “but we need to move very fast in transforming our own internal organisation”.

FLEET AVAILABILITY BACK ON TRACK

One of the big ticks on Jarana’s report, he said, was that SAA had managed to place the “the right aircraft to fly the right route to the right destination”.

He said that previously, the logistical systems at SAA Technical (Saat) had been dysfunctional, which led to “problems over the ability to turn around aircraft quickly in terms of repairs”.

To solve the problem, he introduced a dual-strategy approach of outsourcing and maintaining wide-body jets in the Middle East and Europe, while Saat handled the balance of the repairs.

“That has helped us to bring back fleet availability,” said Jarana.

The consequence of a lagging repairs division was lack of consistency when it came to fleet availability. This meant that a bigger aircraft had to replace a smaller one because of fleet unavailability.

As a result, the bigger aircraft would fly with many empty seats, making the trips unprofitable.

“It changes the economics because you have not solved the problem of those empty seats and the route can become unprofitable not because of the market, but because of the way you are addressing the problem,” said Jarana.

So, fleet availability and the consistency of fleet availability were important for profitability, he said.

There had been widespread allegations that SAA was “unsafe” because of Saat being beset with problems such as corruption, delayed repairs and the dodgy procurement of parts.

"This, after some flights were grounded for safety reasons and Parliament’s public accounts committee had fingered Saat for having a “looting syndicate”.

Jarana said SAA was pushing for procurement benefits at Saat, adding: “That machine is running.”

He was also looking to stabilise the business by recruiting competent top-tier managers for Saat.

“I think that as far as procurement issues, such as components supply, goes, we are out of the woods. We are kind of in the right place now,” said Jarana.

The next phase, he said, was to reconsider Saat’s business model. “We have to make this thing work for the future. We need to make it robust.

"So, we are going to review the business model and ask: ‘What are the things we can do that we can be great at, and what are the things we are not great at that we can let go?’”

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May 19 2019