Q&A: Moving forward

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Despite its troubled financial situation, South Africa’s national carrier is making strides to recover its favourable standing. SAA spokesperson Tlali Tlali outlined some of the recent changes to the airline’s route map and fleet and updated Business Traveller Africa on the effect the oil price and exchange rate have had on the airline.

Q: What factors influenced the decision to begin flights between South Africa and Abuja?
A: There is already a legal framework in place between the two countries, and based on traffic patterns we anticipate higher demand. The Bilateral Air Service Agreement between South Africa and Nigeria allows for 10 frequencies per week between the two countries and the gateways are not limited to any specific airports. SAA is the designated airline for South Africa and we currently operate seven flights per week between O.R. Tambo International Airport and Murtala Muhammad International Airport. So we had an additional three slots available to us, and decided on the capital city of Abuja.

Q: Are you investigating any other new intra-Africa routes for operation in the next five years?
A: It’s no secret that we want to increase our footprint on the African continent in line with our Africa growth strategy. We will continue to explore more opportunities for growth in Africa and routes that show potential for growth will be considered.

Q: Why have you ceased flights to Abu Dhabi?
A: The airline has refined its Long-Term Turnaround Strategy with special focus on its network and fleet plan which requires us to conduct route performance assessments on a continuous basis. The Abu Dhabi route was no different. SAA considered capacity intended to strike a balance between the interests of serving our customers and to avoid increased operating costs which were not supported by the anticipated high demand. Termination was a last resort, which we ended up implementing.

Q: What is the latest on SAA’s Turnaround Strategy?
A: Our strategy implementation is still underway. We have made some noteworthy savings under our cost compression programme. There are other areas of financial performance that have shown significant improvement. Details in this area will be announced in due course.

Q: What changes have you made to your fleet in the last two years?
A:
We have taken delivery of 10 A320 aircraft as part of our fleet modernisation plans. The new planes are more fuel efficient and present an opportunity to introduce to our customers new product. Given its range, the aircraft have been deployed on domestic and some of our regional routes. We have recently installed tablets loaded with content on the A320 as part of our entertainment options.

Q: What is the long-term vision for the SAA fleet?
A: Our fleet requirements are informed by our network plan. The type of aircraft we must acquire will depend largely on the routes we fly and the demand factors. These speak to the appropriate aircraft range and capacity, and these in turn speak to our operational efficiencies and value proposition to our customers. As it is with any other airline that would like to improve its bottom line, SAA can do with a more fuel efficient fleet.

Q: Why have you decided not to develop a premium economy product?
A: We have not ruled out the possibility of developing a premium economy cabin for our aircraft. We are exploring a few options which require us to take a cost element into account.

Q: How has the falling global oil price affected SAA?

A: Airfares consist of base fare, carrier-imposed surcharge (coded YR or YQ) and airport/government taxes and fees. The carrier-imposed surcharge is what a carrier has identified to cover various cost-related items. These charges are identified on a ticket by the code YR/YQ, which indicates fuel surcharges. SAA continuously monitors the fuel fluctuations which are linked to global oil prices and has passed reductions in base fare or carrier-imposed surcharge back to the market. The last general YR/YQ increase was back in March 2014.

Q: How has the change in the Rand-Dollar exchange rate affected SAA?
A: Approximately 60% of our costs is in hard currencies and the revenue generated is not by the same margin.

Q: How do you, as a full-service airline, remain competitive in your domestic market when faced with so much low-cost competition?
A: Being a full-service carrier distinguishes us from low-cost carriers by product and service offering. Our product caters largely for business travellers and our customer base include the corporate sector and government entities. We are also able to offer competitive rates to some leisure traffic which we carry.

Q: Are there any global airline trends that you believe are currently topical?
A: Frequent flyer programmes is one of the many areas which more customers are beginning to take seriously. The SAA Voyager moved from a mileage-based FFP to a full-fledged revenue-based FFP during 2015, an African continent first, and changes became effective on 1 February. These were aimed at revitalising the programme for customer retention purposes and to unlock customer asset value.

 

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