Restart of SAA version 2.0 unlikely in first half of 2021

The Department of Public Enterprises previously stated that the revamped South African Airways would be relaunched in the first half of 2021. The initial restart was planned for April 2021.

The airline, which entered business rescue in December 2019, shows no sign of taking flight again in the near future in light of several ongoing issues. Given the number of unsolved matters which must still be attended to, it is unlikely that the revitalised version of the national carrier will take flight in April.

DRAWN-OUT BUSINESS RESCUE FOR SAA

The business rescue process which has gone on for more than a year is showing no signs of coming to an end any time soon. The business rescue practitioners still have many fires to fight before they can implement the business rescue plan for the beleaguered airline.

SAA FUNDING HITS A SNAG

It was announced in 2020 that the airline needed a bailout to the tune of R10.5bn. Treasury has not been forthcoming with the requested amount, which has led to lengthy delays in the business rescue process.

The business rescue practitioners have received R1.5bn of the R10.5bn that was requested for the airline’s business rescue process.  The money was received more than a month ago.

Most of this funding has not yet been distributed due to ongoing disputes between the business rescue practitioners and the government regarding whether it should be distributed according to the Department of Public Enterprises’ instructions.

LABOUR DISPUTES HOLD UP SAA RESCUE PROCESS

While many of the airline’s employees have accepted severance packages, and the payment of three months’ salaries as back payment during the lockdown, three of the major unions representing the SAA workers still have not agreed to the offer on the table.

The National Union of Metalworkers of South Africa (Numsa), South African Cabin Crew Association (Sacca) and South African Airways Pilots’ Association (Saapa) have rejected the offer made by the Department of Public Enterprises.

Only once an agreement is reached over outstanding payments and severance packages due to employees will the stalemate holding up the restart of the significantly smaller, more sustainable national airline end.

The business rescue practitioners will then also be able to distribute funds and proceed with its rescue plan for the national airline. Only at that point will scheduled flights likely be able to resume.   

UNSUITABLE FLEET FOR SAA’S PLANNED ROUTE NETWORK

After terminating contracts with aircraft lessors and returning leased aircraft in 2020, SAA was left with nine aircraft, which it owns. Tourism Update reports that six of SAA’s remaining nine aircraft are believed to be for sale.

According to the business rescue plan, the revised route network to be operated by the national carrier comprises 27 routes. It will be almost impossible for the airline to operate a network of 27 routes with the aircraft SAA currently has in its possession.

New aircraft would have to be acquired swiftly if SAA is due to start flying again in the near future.

A spokesperson for the business rescue practitioners, Louise Brugman, told Tourism Update SAA’s board and shareholders would make decisions about the route network and leasing of new aircraft. This suggests the matter has not yet been up for discussion and is not considered an urgency.

SALE OF SAA FLIGHTS HALTED

SAA was effectively mothballed in May 2020, when all flights were banned, during the hard lockdown. The airline has not operated scheduled flights for many months, and has lost support and trust from customers and trade partners.

Trade partners have been notified that SAA will not operate any flights until the end of March 2021. Tourism Update reports that travel agents and the airline’s trade partners confirmed SAA’s flights have been removed from reservation systems until the end of March.

“There is currently no expectation that SAA will restart its operations before at least April,” Association of South African Travel Agents (Asata) CEO Otto de Vries told Tourism Update.

CHALLENGING MARKET CONDITIONS

Aviation economist Dr Joachim Vermooten warned there was significantly lower passenger demand for scheduled flights at the moment. The pandemic has resulted in a global slump in demand for flying and tourism.

“It is also a bad time to restart an airline right now. Market forecasts are extremely pessimistic and estimate that 2021 demand will be only 30% of 2019 levels,” Vermooten was quoted by Tourism Update.

LITTLE SPACE IN MARKET FOR SAA

The South African aviation landscape has changed quite significantly since the onset of the pandemic and national lockdown.

The major airlines have lost market share to other smaller airlines like Airlink that have been scaling up their operations and expanding their route networks in the absence of the larger carriers – SAA and British Airways (Comair).

The recent startup of low-cost carrier Lift, and Cemair shifting from mainly charter flights to scheduled operations, has meant several newcomers have filled the gap created by SAA’s absence.

If SAA was to restart operations in the current climate, it might operate empty flights, which would mean a waste of public funds and an unnecessary drain on the fiscus.