South African Airways (SAA) is positioning itself to be a conservative, lean and agile national carrier, but with big ambitions of growing its fleet of 16 aircraft to 43 over the next five years through a combination of savings, debt and strategic partnerships.
This follows a remarkable financial turnaround, where the airline posted a net profit of R252 million for the 2022/23 financial year, significantly boosting total revenue by 183% from R2.0 billion to R5.7bn.
SAA interim CEO John Lamola yesterday said SAA was committed to becoming a prudent and financially self-sufficient national carrier.
Lamola said the airline’s current strategy was marked by a conservative approach to expansion.
“There’s a very strong element of conservatism on the extent of the expansion that SAA has in terms of how many aircraft are we going to get in the coming two to three years and which other routes do we want to expand to. SAA has the success that it has now because we have prudently been very conservative, one, in the sense that in choosing the routes that we launch very carefully, and secondly, in not being caught up into the hype of wanting to recreate the past glorious South African Airways,” he said.
“There is no ambition within our current strategic framework to recreate the old South African Airways because the old South African Airways sank with a debt of R28 billion, which tells you that there were a number of very serious miscalculations that followed that expansion. So it's a sensible model on how a business and an airline should provide for itself.”
SAA was on track to strengthen its fleet, with seven additional aircraft set to join the current lineup in the near future.
“A fleet of 22 aircraft for a national carrier is commendable. Our plan is to build an airline that in the coming five years will be flying a maximum of 43 aircraft,” he said. “The trajectory that we are working on to 43 aircraft is achievable and has a multiplier effect that takes us into 10 years because that multiplier effect means that we'll be able to fly new routes.”
Asked whether SAA was still looking for a strategic equity partner following the collapse of the Takatso Consortium transaction, Lamola said the management was capable of fostering growth independently, but admits the need for partnerships to secure eco-friendly aircraft that are essential for future operations.
Lamola said, for instance, SAA would be requiring eco-friendly aircraft going into the future and it would not have the $70 million (approximately R1.5 billion) each to purchase these aircrafts, hence a “loosely defined” partner would come in handy.
“We are talking to local banks where we are raising some amount of funds to enable us to be cushioned from any unforeseen risks that we might have that we spoke about. And that is just for phase one. It's a risk mitigation capital base that we are involved in. Phase two is a strategic equity partner that is very loosely defined,” he said.
He said it must be emphasized, that unlike the previous heated conversation around this topic, there were already discussions on how SAA should listen to a number of approaches.
Meanwhile, the report on a study by Oxford Economics Africa released yesterday showed that SAA’s Gross Value Add to South Africa’s GDP will more than triple over the next five years, rising from R9.1bn to R32.6bn by 2029/30.
The study also shows that the SAA Group’s operations will support 86 700 jobs by 2029/30, up from 25 000 jobs in 2023/24.
Furthermore, the SAA Group’s operations stimulated fiscal revenues (tax) of R1.1bn in 2023/24, a figure that is projected to rise to R4.4bn in 2029/30.
The report estimates the SAA Group’s tourism impact at R1.7bn in 2023/24, rising to R8.9bn in 2029/30.
BUSINESS REPORT