There’s a message for flat-broke South African Airways: hang in there!

It runs in parallel with Public Enterprises Pravin Gordhan’s warning that the airline must clean out corruption if it hopes to survive.

And it supersedes the call by Finance Minister Tito Mboweni that that company, which has not made a profit since 2011, must go to the wall.

The latter is perfectly right in saying no bank or enterprise would get involved with SAA in its current financial state.

But Mboweni’s been repudiated by President Cyril Ramaphosa because, he says, closing the airline would necessitate immediate repayment of its R22 billion debt. This would enormously damage the fiscus.

There’s speculation that Ramaphosa’s remarks have turned his new finance minister into a lame duck: a political has-been who is allowed to say what he wants because he  is only serving his time until after next year’s election.

In fact, Mboweni might have been directed to throw a stone into the bush to see what reaction he could provoke from SAA staff and trade unions who have a veritable bottle of bitter pills to swallow if survival is the option.

These range from exposing the corruption within their ranks to accepting marginal salary increases at best.

My introductory message is based on African aviation predictions.

If SAA can survive it can pick itself up on the approaching boom in African air travel.

IATA figures show the increase in air traffic between sub-Saharan Africa and China will run at 11% over the next decade which will place it among the fastest growing routes on the planet.

Projected traffic between South Africa and China is pretty much in line with this.

China is projected to buy 7690 new aircraft by 2037 with a staggering price tag of $1,2 trillion.

This makes the contest between Airbus and Boeing  for sales to China the most interesting aviation battleground.

US President Donald Trump’s trade war with China is doing Boeing no favours  in this dogfight.

Just this week, Airbus executives are in Beijing talking about the sale of 180 Airbus A320s at price of $18 billion dollars.

If it does get to contest the skies tomorrow, SAA will face new competition.

As US voters cast their ballots in the midterm elections, the Airbus 330-800, which will be the warhorse in that battle, made its maiden flight in Toulouse.

The wide-bodied liner with a capacity of 257 passengers is powered by Rolls Royce Trent 7000 engines that are quieter than their predecessors and 14% more fuel efficient.

Air Mauritius, Air Senegal and RwandAir have firmed up their orders for the new aircraft.

The nascent Uganda Air has signed a memorandum of understanding for two A330-800s.

Nigeria that has taken an on-off approach to reinstating a national carrier could add to the competition

However, there is plenty for everyone. 

The dearth of road and rail infrastructure makes air travel between African countries –  and particularly the  movement of perishable goods – indispensable as their population grows to 1,4 billion.

Ethiopian Airlines, which has a fleet more than twice the size of SAA’s, will indubitably remain the continental giant and an example the South African carrier should emulate wherever possible.

It’s major competitors are not SAA, Kenya Airways and Egyptair but Qatar, Emirates and Turkish Airlines.

Its growth has come from a protected regulatory  framework, the cross subsidization of airport revenue and concessionary fees at Ethiopian airports.

Competitive pricing has enabled it to make the frankly substandard Bole International Airport in Addis Ababa a hub competing with Singapore, Istanbul and Dubai.

The bulk of Ethiopia Airlines’ planes are wide-bodied liners from the Boeing and Airbus range. 

The fleet is constantly updated with planes being  exchanged every six-and-a-half years.

Somehow SAA has to change its message from “ah, if only”  to becoming the Little Red Engine saying: “I think I can.”

The post Message to SAA: hang in there appeared first on Jean-Jacques Cornish.

He was speaking to staff of South African Airways following last week’s assertion by Finance Minister Tito Mboweni that the the loss-making airline should be closed down.

Pravin Gordhan says eight months into the corruption-fighting Presidency of Cyril Ramaphosa, the staff of  SAA is still protecting corrupt colleagues.

Gordhan does not agree with Mboweni  that South African taxpayer should not have to finance an airline the country can’t afford.

Mboweni has drawn flak for his remarks at a New York investor conference from the executive of the ruling African National Congress and the unions representing the airline’s 8000 employees.

Gordon tells the employees if they want SAA to survive they must clean out the corruption that has plagued it for years.

“One of the problems they have is  bad decisions. But they have also been badly affected by corruption in the past. This is a matter we have to deal with and expose. We still have a situation today where key parts of an aircraft were, for example, bought at a 50 to 100% premium through middle people rather than buying directly from the original equipment manufacturer. We cannot continue. On the one hand they say we want a bail out and on the other hand we want to carry on feeding pockets that should not be fed,” said Gordhan.

Head of the  SAA pilots association Grant Back welcomes Gordhan’s inspirational speech to them.

He recognizes that they will have to fight corruption and says the airline is in desperate need of  dynamic leadership.

The pilots hope the whole board of SAA will back the chief executive Vuyani Jarana’s turn around strategy to end seven consecutive loss-making years.

The post Pravin Gordhan says cleaning out SAA is essential for its survival appeared first on Jean-Jacques Cornish.

If South Africa wants an airline, he told investors in New York, it should start afresh.

South African Airways has not made a profit since 2011.

It has been kept airborne by massive injections of cash that the state says it can no longer afford to pay.

No bank is prepared to step in and no investor would be prepared to take on SAA’s 1.3-billion euro debt.

The South African Government has fallen into the same trap as many African countries in believing the national carrier is a measure of prestige.

It has bought aircraft it cannot hope to fill and flown routes that could not possibly be profitable.

The new Finance Minister Tito Mboweni is adamant that there can be no holy cows in South African efforts to revitalize its faltering economy.

He accepts the future of SAA is not under his remit, and therefore he cannot make decisions about the airline.

“It’s loss making.It’s very clear to me that you are unlikely to sort out this situation. So my view would be: close it down.We have the case study of Swiss Air, which had to close down and start a new airline. The only thing I would request is: give us the colors. Why I said close it down is because it’s unlikely you are going to find an private sector partner would come and join this asset,” says Mboweni.

He says after closing SAA, the government could involve private equity partners and launch a joint venture airline.

The post Finance Minister says South African Airways should be closed down appeared first on Jean-Jacques Cornish.