Huge challenges remain for SAA and southern Africa's airlines

If Southern Africa is a rising star of the global economy, the same might not yet be said for its airlines. In the past decade, growing prosperity has led to the emergence of a middle class keen to fly, but the largely state-owned airline sector is still beset by creaking infrastructure, ageing fleets, protectionism, inefficiency and (in parts of the region) a worrying reputation for patchy safety oversight.

Billypix SAA chief executive Siza Mzimela is determined to steer a turnaround at the airline

South Africa has by far the biggest and most developed aviation market in the region, with a number of independent airlines and the only network carrier in South African Airlines. However, even the Star Alliance member is facing pressure in the face of rising fuel costs, a weak rand and increased competition on its long-haul routes into Africa from Gulf-based airlines. After two years of profitability, it will post a loss this financial year. CREDITOR PROTECTION
Elsewhere, the owner of South Africa's 1time Airline, which operates a domestic and regional network with 10 Boeing MD-80s, has filed for creditor protection as it attempts to reduce its debt. And in the wider region, Air Zimbabwe suspended most of its services earlier this year and appears near collapse.
Chris Zweigenthal, chief executive of the Airlines Association of Southern Africa - which represents 17 of the flag carriers and domestic airlines in the Southern African Development Community area - admits that, while long-term prospects for the region's airlines are strong, there remain many obstacles to growth. "Each country wanting to have its own airline is a challenge for sustainability, as many of them don't have the volumes of business," he says. "Dollar costs make for a high cost structure and landing fees, tourism taxes and security charges levied by each state all add to the cost pressures." Fifth freedoms - which allow airlines to carry passengers between two foreign countries - are also rare, he notes.
On the plus side, strengthening economies and growing numbers of tourists, investors and specialists coming into the region will push traffic up from a low base, he says. The African airline network is still concentrated around a few network carriers and hubs in Johannesburg, Nairobi, Addis Ababa and Lagos - often making it necessary for a round trip of thousands of miles to travel between neighbouring capitals. However, "some city pairs are beginning to appear", says Zweigenthal.
With most of the airline market focused on South Africa, the country's recent economic troubles have hit the sector. Double-figure growth in traffic "hit a huge dip" in 2009, he says. "We are going through a tough time in 2012 with the problems in the eurozone, but we are expecting 3% growth in traffic in 2013 and 2014. Zimbabwe will recover. Botswana is strong. Angola and Mozambique are starting to blossom thanks to oil and gas," he says.
SAA chief executive Siza Mzimela is determined to steer a turnaround at the airline, but says the fundamentals of SAA are strong and this year's financial loss will be almost entirely down to the rise in fuel costs. The state-owned airline is going through an efficiency drive, trimming costs and increasing utilisation of its 24 long-haul Airbus A330 and A340 widebodies by deploying them on African routes.
SAA is also focusing more on Africa, says Mzimela. The airline flies to 26 destinations on the continent but plans to open a hub in West Africa - possibly Ghana - to offer more east-west city pairs. "We want an even stronger presence on the continent, driving intra-African routes," she says. A switch from some traditional markets, such as the UK, to Asia and South America is also on the cards.
While SAA has dropped its largely leisure-driven London to Cape Town route, it has launched services to Beijing and increased frequencies to Asia and Latin America. Mzimela wants to position Johannesburg as a convenient hub for travellers going between South America and parts of Asia. "On a smaller scale we are doing what the Middle Eastern airlines are doing in creating a global hub," she says.
SAA intends to increase its long-haul fleet in the next five years to 30 aircraft, with a decision on types by the end of the year. The airline has been all-Airbus on widebodies since retiring its last Boeing 747-400s in 2010, with a mix of A330s and A340s - although its 17 A340s are likely to be replaced. But while its 13 Boeing 737-800s are also being phased out to leave it with an all-Airbus short-haul fleet too, Mzimela says SAA has "no intention to move out of Boeing" and the US manufacturer is still very much in contention when it comes to its future long-haul fleet.
Source:Flight global International