A greatly shrunken South African Airways is prepping to restart flights later in September after an 18-month pandemic hiatus. The relaunch comes as the South African government nears a potential deal with a private consortium to come on as an equity partner in the long-ailing national carrier.
The airline will relaunch with just six routes — Johannesburg to Cape Town, as well as to Accra, Harare, Kinshasa, Lusaka and Maputo — on September 23, SAA Interim CEO Thomas Kgokolo told the South African parliament’s Committee on Public Enterprises on Wednesday. SAA suspended flights on March 27, 2020 when the first Covid-19 pandemic lockdowns began. The six routes represented nearly 15 percent of its capacity in 2019, according to Cirium schedule data.
During SAA’s suspension, the carrier worked through the South African equivalent of bankruptcy restructuring known as “business rescue.” In that process, the airline shed more than 3,500 staff and will relaunch with a workforce of fewer than 1,000 people. SAA reworked its aircraft agreements with lessors and will operate a limited fleet of Airbus A320 and A330 jets under power-by-the-hour agreements, in which the carrier pays only for the time aircraft fly. And SAA also received 10.5 billion rand ($729 million) in state aid that it used, among other things, to pay down debt, for employee severance packages, and to maintain liquidity during its suspension. The airline exited business rescue on April 30.
“We are very excited about the restart,” said Kgokolo. In his presentation, he outlined how the aim of the restructuring was to build a “viable and sustainable national carrier” — something SAA has not been for many years. The relaunch gives the airline the opportunity to test the market and see what routes work with the six markets selected for their higher load factors and yields.
But SAA relaunches into a changed market. South Africans have faced three national lockdowns since the pandemic began that brought domestic air travel nearly to a halt in April and May 2020. Since then, data from the country’s largest airports operator — Airports Company South Africa, whose assets include the Cape Town and Johannesburg airports — shows passenger traffic only recovered to 46 percent of 2019 levels during the first seven months of the year. And that limited recovery occurred with SAA suspended.
And foreign carriers have looked elsewhere for domestic partners. In August, Emirates unveiled a new partnership with CemAir. And Qatar Airways executives have said they are looking for additional partners in Southern Africa. Both Emirates and Qatar offer multiple flights into South Africa.
In his presentation, Kgokolo acknowledged that more work on SAA’s long-term viability is needed. For one, its Mango subsidiary entered business rescue at the end of July despite flying a reduced schedule through the pandemic. Its restructuring is in its “early stages” with the first meetings between the business rescue practitioner and both staff and creditors held on August 18, he said. The budget carrier has received 100 million rand from the 10.5 billion rand allocated to SAA to pay staff and creditors with additional funds expected.
SAA leadership plans to rejig both its fleet and route map as part of building a sustainable airline long term, said Kgokolo. This will include a “fleet reconfiguration” that, although he did not say it specifically, could include the introduction of new aircraft types that better match post-pandemic travel demand. In addition, management is looking closely at the airline’s route map that has long focused on a hub-and-spoke operation centered on Johannesburg.
Part of that long-term plan is the introduction of a strategic partner at the behest of the government. The Takatso Consortium, which includes Johannesburg-based Global Airways — owner of South African budget startup Lift Airlines — and private equity firm Harith General Partners, has completed its due diligence of a potential acquisition of a 51 percent stake in the airline and found “no material issues,” as Kgokolo put it. He did not provide any additional details of the process that is being managed by South Africa’s Department of Public Enterprises.