SAA’s turbulent past includes severe funding and liquidity constraints, which resulted in government bailouts.
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South African Airways (SAA) has reported steady and sustainable growth, marking three years since its return to the skies.
The airline, which faced severe financial and operational difficulties, is now demonstrating signs of recovery and expansion.
A history of struggles
SAA’s turbulent past includes severe funding and liquidity constraints, which resulted in government bailouts. High loan interest costs and poor revenue generation compounded its financial troubles.
In addition, the airline faced corruption and mismanagement issues, contributing to significant financial losses. These issues were highlighted during an official inquiry into state capture between 2012 and 2017.
READ: State Capture Commission: Five years on, a smidge of accountability, but little to prevent a repeat
The Covid-19 pandemic worsened the airline’s difficulties, leading to a 16-month operational shutdown.
To avoid liquidation, SAA entered a business rescue process in December 2019, initiating a large-scale restructuring that involved job cuts and fleet reductions.
The restructuring was essential to stabilise the airline, though it also reduced SAA’s market presence.
Moreover, South Africa’s deregulated domestic air transport sector increased competition, particularly from low-cost carriers, further threatening SAA’s market position. Additionally, the airline struggled with the high maintenance costs of its ageing fleet, fuel inefficiency, and the volatility of fuel prices and currency exchange rates.
Signs of recovery
In a letter to SAA staff and stakeholders marking three years of recovery, interim CEO John Lamola highlighted the airline’s progress.
Lamola stated:
We are proud that between August 2022 and August 2024, we have grown the airline to 16 aircraft flying 15 routes, with a 400% growth in passenger revenues during that period.
He also noted that the airline has more than doubled its route network and tripled its fleet size since its return to the skies.
In addition, SAA has reopened 11 international outstations, including Mauritius, Perth in Australia, and São Paulo in Brazil. SAA’s workforce has also expanded from 500 employees to 1 200, including 140 pilots.
SAA is set to continue its growth with the planned launch of two new routes from its Johannesburg hub in November, connecting to Lubumbashi in the Democratic Republic of Congo (DRC) and Dar es Salaam in Tanzania.
Strategic vision
Lamola revealed that in a recent meeting with South Africa’s transport minister Barbara Creecy, they discussed SAA’s medium and long-term plans.
The discussions followed President Cyril Ramaphosa’s decision to assign shareholder responsibility for SAA to the department.
Lamola expressed excitement about SAA’s future as part of South Africa’s state-owned transport infrastructure entity, emphasising the airline’s sharpened focus on delivering world-class passenger services.
Lamola confirmed that SAA is currently executing a business plan that aims to achieve profitability from revenue generated by its operations.
READ: Ramaphosa assigns new homes to Transnet, Eskom
He also hinted at the possibility of a new strategic equity partnership, but said the decision rests with the airline’s shareholder, the South African government.
“As with any airline, SAA’s growth and defence of market share will require continuous capital investment,” Lamola stated.
He said:
We are exploring financing options to fund further expansion and to elevate our customer service.
Over the past three years, SAA has rebuilt its fleet, relying on its improved creditworthiness and positive reputation with both international and national financial institutions.
SAA revealed that it has identified several assets to unlock further funding, including a portfolio of real estate recently valued at R5.5 billion.
The airline also has a surplus of aircraft stock, which it is converting into cash to strengthen its balance sheet.
Financial performance
Since restarting operations in September 2021, SAA has experienced steady revenue growth.
In the 2022/23 financial year, SAA’s revenue grew by an impressive 96%, reaching R5.6 billion, up from R2 billion the previous year.
This growth was based on a fleet of six aircrafts flying six routes. For the 2023/24 financial year, revenue increased by a further 49% to R7.3 billion, as the airline’s fleet capacity expanded to 13 aircrafts.
The airline also confirmed that the external audit for its 2022/23 financial results has been completed and closed, with all indications pointing to a net profit for the year. The audit for the year ending March 2024 is currently underway.
Commitment to safety
SAA also addressed concerns about its operational integrity following action taken by the South African Civil Aviation Authority (SACAA) against Nonhlanhla Sishaba, SAA’s chief medical officer. Sishaba is under investigation for alleged improper and fraudulent conduct in her role.
SAA reassured customers and the public that its operations remain unaffected. Following an assessment of personnel examined by Sishaba, only two cabin crew members and one pilot were found to be impacted.
They will be medically recertified by the end of September.
Lamola reaffirmed SAA’s commitment to maintaining the highest standards of aviation safety, stating that the airline has zero tolerance for any violations of safety regulations.
Future prospects
SAA’s growth strategy focuses on ensuring the airline’s profitability while providing award-winning service to its customers.
Lamola concluded:
SAA is now positioned to embrace its national developmental mandate of stimulating tourism, trade and transformation in the aviation sector, without compromising its commercial viability.
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