Days after it was disclosed that cash-strapped South African Airways would sell some aircraft in its fleet in line with a restructuring plan, the national carrier is cancelling some foreign routes. This includes flights to neighbouring countries where it has grossed poor revenue in the past years.
The airline has been struggling financially, and failure of the government to disburse the promised $138 million (2 billion-rand) for its operation compounded its situation. This led to the cancellation of Cape Town, Durban and Munich flight from Johannesburg.
The decision to cancel the affected routes is part of South African Airways ways of managing its finances until it receives the new capital injection. The airline is trying to “conserve cash and optimize the airline’s position ahead of any further capital investment,” it said in a Bloomberg report.
South African Airways selling off aircraft: Part of the measures being adopted by the company include selling off its aircraft. Although the airline reportedly made the decision in order to accommodate the new Airbus A350-900s, mismanagement and corruption allegations are the causes of its predicament.
Speaking on the planned sale, the Acting Chief Executive Officer of the airline, Zuks Ramasia, said, “The decision to sell the aircraft has nothing to do with the business rescue process. For some time we had planned to replace our four-engine aircraft with the two-engine ones.”
However, the number of aircraft being sold raises concern as the company already put up nine wide-body aircraft, five Airbus A340-300s and four Airbus A340-600s as well as 15 spare engines for sale.
According to a report, the new A350s will start operating on SAA’s international route network in a couple of days.
Route with poor revenue return: While the airline has disclosed the route it would exclude from its flights, a conclusion has been drawn from the report by former CEO, Vuyani Jarana. He had disclosed some routes that were affecting revenue generation in his report. It was made known that routes outside South Africa were mostly affected.
It was learnt that in the history of South African Airways, just half of the flight revenue was generated from nine destinations outside African routes. According to the report, flights to Hong Kong, Munich, Frankfurt and Ethiopia were some of the low revenue routes; the Hong Kong flights were suspended in November due to protests.
Out of the 21 African routes, Ethiopia was the only African destination that proved tough to crack, and it was understood because Ethiopia also has a state-run airline which is the biggest in Africa. Also, local routes like Port Elizabeth recorded loss.
Money making routes for SSA: Nigeria and Washington D.C are some of the flight destinations that have been profitable to South African Airways. Nigeria, Zimbabwe, Zambia and Mozambique generate about 30% of South African Airways flight revenue. Domestic routes like Durban, Cape Town and East London were also reported profitable, contributing 17% to the company’s revenue.
The South African Airways’ business rescue practitioners, Les Matuson and Siviwe Dongwana are expected to present a turnaround plan to creditors by February 28, 2020. Exclusion of unprofitable routes is expected to be part of their rescue plan as well as the restructuring of the airline’s operations.
Note that in order to keep its revenue high, South African Airways leased fuel-efficient Airbus A350-900 planes to use on some long-haul routes in a bid to reduce international losses.