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A few days ago we learned that South African Airways is preparing to liquidate, as the government has rejected more funds for the airline and will soon dismiss all staff. The airline has been losing money for many years, although the current situation has made matters worse.
Well, it seems that the situation might not be what we expected.
South Africa to form new national airline
Reuters reports that the South African government has made it clear that they intend to create a new economically viable and competitive airline out of the current trade bailout process.
This came through a statement from the South African public business ministry, as the government will work with SAA unions to preserve as many jobs as possible.
I’m skeptical …
I am skeptical about the prospects for this for a couple of reasons:
- The government is not in a position to provide more capital for SAA, but presumably any type of airline restart would be extremely costly.
- I can’t think of many examples of airline restarts that were successful in this way, where a government-supported national airline technically closes, and then a successful new national airline emerges, presumably still government-supported (actually sounds a bit like Air Zimbabwe)
South Africa needs a good regional airline
When writing about potentially liquidating SAA, I raised the question of whether South Africa would get a new national airline, so I guess it wasn’t too far.
In my opinion, what South Africa needs is an airline that offers a good network nationally and regionally, rather than a good long distance network.
When you look at the South African Airways “family” right now, you have:
- South African Airways
- Mango, which is the low-cost subsidiary of South African Airways
- SA Express, which is not owned by South African Airways, but operates as a regional carrier for the airline
Among those operations, a new airline would have to find a consistent way to offer regional service.
I don’t think South Africa really needs a long distance airline, because these routes can be difficult to operate profitably without a broader strategy:
- All Gulf carriers fly to South Africa and offer connectivity to all parts of the world.
- Most major European airlines fly to South Africa and also offer good connectivity.
- Ethiopian Airlines is a power in Africa, so we could see them increase connectivity with South Africa, so it can reach most points in the world in one stop.
Even outside South Africa, South African Airways has been unable to compete with other airlines in terms of price, product and schedule.
Bottom line
South Africa plans to create a new national airline, which makes me question whether they really plan to cut SAA.
If there is any chance that things will really change, I really think they need to shut down SAA entirely, and then start from scratch, because otherwise some of the airline’s core issues are unlikely to be addressed.
If a new airline emerges, I firmly believe that the focus should be on offering regional connectivity and having one or two strong partnerships (or even joint ventures) for global connectivity.
What would you like to see from a new national airline in South Africa?
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