South African ambitions

posted on 13th July 2022
South African ambitions

After a tough pandemic that saw air services almost completely closed for extensive periods, South Africa’s airlines are steadily reopening, and expanding their route networks, and South African Airways is still alive and kicking. Alan Dron talks to the leading players to discover what next for the country’s network development

Traditionally, South Africa was Africa’s most advanced civil aviation marketplace. With the possible exception of Nigeria, no other nation had as many airlines – and they were considerably more stable than those in the West African nation.
However, South Africa was hit harder than most countries by Covid-19, with its government imposing a ban on all passenger flights from an early stage in the pandemic. This led to one of the country’s most important regional carriers, SA Express, collapsing.
Now, as the risks of Covid slowly recede, the country is trying to rebuild its civil aviation network. With what success?
South Africa is an important market not only in its own right; in terms of connectivity, it is also one of sub-Saharan Africa’s major aviation hubs. Neighbouring countries, such as Namibia, Swaziland, Zimbabwe and Botswana depend significantly on South Africa’s economy, policies and general aviation strategy.
“The past two years have been very challenging for South Africa’s aviation industry,” admitted Wrenelle Stander, former head of South African regional carrier Comair and now CEO of Wesgro, the tourism, trade and investment promotion agency for Cape Town and the Western Cape.
Certainly, she sees welcome signs that long-haul services to South Africa are rapidly improving, after a false start last year. “The outlook for our past summer season was very promising until the Omicron variant was discovered in this country. This led to many cancellations of routes.
“However, from the 35% recovery of international pax traffic in January, the recovery for Cape Town International Airport was impressive, with 50% in February, 61% in March to almost 80% for the first half of April compared to the same periods in 2019.
“We see a promising return of leisure travellers to our destination and we are very upbeat for the coming months.
“Our traditional markets will see an improved network with United Airlines starting to operate a year-round Newark–Cape Town service from June 5, Delta Airlines receiving recent approval to operate a year-round Atlanta–Johannesburg–Cape Town-Atlanta service and both airlines requesting additional direct frequencies to Cape Town.
“The UK market will see (besides British Airways) the return of Virgin Atlantic with four weekly flights at the end of the year and German carriers want to add more frequencies to South Africa, like a direct Frankfurt to Kruger Mpumalanga International Airport route (via Windhoek, Namibia) starting in November 2022.
“A newcomer like Air Belgium also confirmed that it will start operating flights from Brussels to both Johannesburg and Cape Town before year-end, meaning our North America and Europe network will not only return but further expand.”
Stander noted that the South African domestic passenger market is very robust and has recovered reasonably quickly after each lockdown period, even with the disappearance of SA Express.
“For the first four months of 2022 the recovery percentage stands at about 70% if compared to the same period in 2019. The gap left by SA Express has been filled quite quickly. Most of the regional routes have been taken over by Airlink, like the Johannesburg–Lumbumbashi [Democratic Republic of Congo] route and the Cape Town–Walvis Bay [Namibia] route.
“On the domestic front the same happened. For example, the Cape Town–Hoedspruit route is now being operated by both Airlink and Cemair. FlySafair and BA Comair now operate flights from Cape Town to East London and Port Elizabeth, routes that were served by SA Express before they ended in provisional liquidation in 2020.”
Internationally, flag-carrier South African Airways (SAA) has always been the biggest component in the South African civil aviation scene. It was arguably regarded as the continent’s foremost airline. But increasingly, the company was regarded as an economic basket-case and has been through tough times. Even before the virus made its presence felt, SAA had become financially weak, kept afloat by a series of government bailouts.
Professional staff were highly rated, but senior management was, to put it politely, problematical. Layers of management were wracked by allegations of political favouritism and corruption, and one ex-chairman is currently facing trial.
An ageing, increasingly uneconomic fleet – especially in its long-haul sector – was one of the reasons behind the losses, but so was a bloated workforce. On top of that, SAA came under growing pressure from the major Gulf carriers Emirates, Etihad and Qatar Airways, together with Turkish Airlines, all of which had marked Africa as a region for expansion. More and more passengers from South Africa and nearby nations – who might once have travelled to Johannesburg for onward long-haul flights – were siphoned off to the huge Gulf hubs.
All this led to SAA entering the country’s business rescue procedure – the local equivalent of the US Chapter 11 proceedings, where a company is allowed legal protection from creditors while it attempts to restructure – in December 2019, even before the pandemic struck.
Following its emergence from business rescue, and with a new domestic consortium about to formally become SAA’s majority shareholder, the company’s chief commercial officer, Simon Newton-Smith, echoed Stander’s optimism over the domestic market.
“That’s been pretty robust, other than in the major lockdowns. I think the domestic market is around 80% recovered to 2019 levels.” He believes that the South African market will be back fully to 2019 levels by this year’s southern hemisphere summer, in November/December.
At present, “What the network has traditionally had is international connecting traffic and that’s quite sharply down. Beyond South Africa’s boundaries, demand hasn’t recovered to quite the same extent.” Newton-Smith reckons it lies somewhere in the 40%-70% range.
“That’s not a huge surprise. If you’ve got to cross borders you’ve still got some complexity,” he said. It was very noticeable, however, that as soon as Covid restrictions were removed, demand rose sharply.
However, in terms of restoring SAA’s route network, “We’ve got a ways to go,” he admitted. “We’ve got a five-year plan and we’re still in the first year. Restarting an airline is tough at the best of times. Doing it after Covid adds an extra layer of complexity.
“As far as the route network right now we’re focused on rebuilding the regional African network. Our goal is to restore our original network over the next three to three-and-a-half years. Historically, the regional African network was very much SAA’s network sweet spot.”
Before it entered business rescue, SAA had a fleet of around 30 aircraft. At the time of writing in late April, that fleet had shrunk to just seven – five Airbus A319/320s, a single A330-300 and a recently acquired A340-300, primarily used for charter work.
The A330 flies medium-haul routes to Accra and Lagos in West Africa. The charter work takes the form of services for tour operators, while the continuing demand for cargo capacity means that its belly hold can be utilised for freight. SAA is also interested in providing charter capacity for other airlines or governments, said Newton-Smith.
While it is probably too early to go into details about how SAA plans to acquire new aircraft, he said the company’s plan is to reach a fleet of 25-30 aircraft – mainly narrowbodies – during its five-year plan.
A further two A320-family aircraft plus an additional A330 are expected to be acquired in the second half of this year, to meet growth requirements.
The South African domestic market is becoming increasingly competitive, with low-cost carriers FlySafair and Kulula.com being joined by newcomer Lift. At present, Lift operates only a single route but has plans to expand.
Airlink is also an increasingly powerful presence in the market, with a fleet of more than 50 aircraft ranging from Cessna Grand Caravans to Embraer 190s. It operates not only an extensive domestic network but also routes within southern and eastern Africa as far north as Entebbe in Uganda.
British Airways franchise operator Comair is also present, and regional carrier CemAir is increasingly moving from ACMI work for other airlines throughout Africa to scheduled operations.
“Now that the air service licensing council in South Africa [which approves new routes] is operational again after a long absence, the international and regional network can be improved,” said Stander.
“FlySafair recently started a Johannesburg-Mauritius service, Cemair wants to expand its fleet and Airlink is connecting Johannesburg, Durban and Cape Town to South Africa and other regional markets.
“For Cape Town we see great opportunities for regional airlines to expand to other major markets so more African itineraries can start from here. As an example, a Cape Town–Kruger Park–Victoria Falls–Cape Town route offers all the major highlights Southern Africa has to offer,” she said.
This influx of capacity within South Africa’s borders is another reason why regional flights to the countries of southern Africa are SAA’s business ‘sweet spot’.
One major change to the South African airline landscape is the disappearance of SA Express (SAX), which functioned as a regional feeder carrier for SAA. Like SAA, it underwent business rescue, but failed to emerge from the other end of the tunnel.
However, the loss of SAX should not adversely affect SAA, said Newton-Smith. “We have interline agreements with a number of other carriers in the market, so we’re able to replicate or replace some of the connecting feed that we had. We’re working with them – and others – to bridge the gap.”
SAA also plans to use connections with other airlines to improve its international ‘reach’ while gradually rebuilding its long-haul fleet. SAA is a member of Star Alliance, and so has links with the alliance’s other 25 participants.
Making use of those links in the short term by leveraging codeshares “makes complete sense. Globally, projections are that long-haul traffic demand won’t recover to anything close to pre-Covid levels until 2023 at the earliest, more likely not until the 2024-25 timeframe,” Newton-Smith said.
For her part, Stander believes that SAA has a decent future, despite the loss of both SAX and feeder services previously provided by Airlink, which have now ended.
She observed: “SAA had the largest market share for international passenger traffic for both Johannesburg as well as Cape Town until 2017. This meant that many travellers transferred at Johannesburg for their onward journey to Cape Town, as SAA has not been operating international flights from Cape Town since 2012.
“Since 2016 we have seen a trend of more international carriers adding capacity or starting to operate direct flights to Cape Town, and the market share of SAA in Cape Town declined dramatically since then. By the end of 2019, SAA was the third-largest international carrier for Cape Town traffic. SAA only operates Johannesburg–Cape Town and Johannesburg–Durban flights in South Africa at the moment, so its national network is limited.”
Like Newton-Smith, she sees good prospects for SAA in West Africa: “We see opportunities for SAA to also start operating regional flights from Cape Town as our network to West Africa is currently non-existent. A direct Cape Town route to Lagos or Accra would definitely work, as there is sufficient demand and would lead to further market stimulation between those markets.”
The concern remains that non-African carriers are siphoning off long-haul traffic from SAA. In May, for example, Emirates and the South African Tourism Board signed a memorandum of understanding to jointly promote tourism and boost visitor arrivals and inbound traffic to South Africa from key markets across the Emirates network.
One way of mitigating the problem of non-African carriers poaching South African traffic, Newton-Smith said, is for African airlines to team up. With this in mind, SAA in 2021 signed a strategic partnership with Kenya Airways.
“Africa has the largest imbalance of capacity and demand anywhere in the world. We can’t [solve that] by ourselves and Kenya Airways can’t do it by themselves,” he said.
Even linking up the two airlines might not be sufficient, but they hope to bring together like-minded African airlines, whose route networks could be connected through multiple hubs and allow passengers to fly across Africa.
Stander believes that the South African–Kenyan partnership can pay dividends: “There is demand for another strong airline in Africa that can compete with Ethiopian Airlines and offer more flight options.”
Intra-African travel is still relatively difficult, due to a combination of difficult visa regimes, low flight frequencies and high costs, factors that have led to the ridiculous situation where passengers wanting to get from one region of Africa to another frequently still have to make a connection outside the continent – either in Europe or the Gulf.
Bringing together African airlines in what Newton-Smith described as “aggressive collaboration” could help eliminate that situation.
Some African governments remain apprehensive about their national airlines being overwhelmed by larger carriers, he admitted, adding: “But if there’s one thing I get a sense that airlines are thinking about, it’s that we can’t continue to do things the way we used to do them.”