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South African Airways sees profits amid the gloom as network grows

1-Jul-2009

South African Airways (SAA) is confident of reporting an operating profit in excess of ZAR2.5 billion (USD100 million) for the 12 months ending 31-Mar-2010, as it finally sees the benefits from a multi-year restructuring project, the rationalisation of capacity in weaker markets and growth in other core markets.

Network expansion

SAA has been ramping up capacity to Australia, South and North America and West Africa.

Three extra flights have been added to Lagos (Nigeria), for a total of seven per week, including B747-400 equipment on four of these frequencies. Services to Douala (Cameroon) will increase from two to three per week. SAA introduced daily jet service between Johannesburg and Maun (Botswana), operated by its regional partner, South African Express (SAX) on 01-Jul-2009 with 50-seat Canadair CRJ-200 regional jet. However, some domestic and international African destinations have seen a reduction in capacity in line with weaker demand.

SAA is also strengthening its network with additional frequencies to Perth (Australia) from five times weekly to daily from 01-Sep-2009, and Buenos Aires (Argentina) from twice to three times weekly.

The carrier offers non-stop service from the US to South Africa with daily departures from Washington DC (until 30-Apr-2009, with a stop in Dakar that commenced on 01-May-2009) and direct service from New York (operating non-stop from 01-May-2009). SAA is also offering a new connecting service from Washington Dulles to Abidjan (Ivory Coast) and Libreville (Gabon) through its daily non-stop service to Dakar (Senegal), capitalising on Delta Air Lines’ delays in obtaining regulatory approval to expand its network to West Africa.

SAA also benefited from the IPL Twenty20 cricket tournament in South Africa in Apr/May-2009. The carrier deployed six additional flights between India and South Africa from 18-May-2009 to 26-May-2009 to accommodate extra demand.

A320 order clouds outlook

SAA’s Acting CEO, Chris Smyth, recently stated the airline reported a “slight loss” in 2008/09 and a ZAR880 million loss the previous year. Mr Smyth replaced Khaya Ngqula, who was forced from the position in Feb-2009 by the carrier’s Board following an investigation into tenders and procurement agreements.

A net profit target for the current financial year has not been disclosed, but hinges on an uncertain order for 15 A320s the airline had thought it cancelled in 2002. Airbus is reportedly holding SAA to the order that could cost up to ZAR1.5 billion to cancel.


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