Here is some simple economics:
Comair: B733/B734/MD82 = R133 million 2005/2006 operating profit.
SAA: B738/A319 = R652 million loss in 6 months.
Maybe thats why the other SA airlines dont operate $40 million equipment - at current ticket prices, making a profit is impossible.
It would be stupid to be so simplistic in ones analysis of the current performance. SAA revenue GREW by ZAR 600 mil in the period under review to 9.6billion. Domestic, utilizing “40 million” 738/319’s turned a PROFIT for the same period; our African operations did even better. The operations where losses were made was on certain long haul routes- some of these routes lost significantly. This was mainly due to the incorrect aircraft type being operated for the market- something that’s out of our hands for now but will get better in the next northern winter schedule.
The major contributing factor was SAA’s runaway cost structure- certain areas of the business have been poorly managed and this has led to poor control of vendors among other things. Too many heads is another one.
An intervention plan has already been implemented to address these cost drivers- one of which is the retrenchment of staff, other include the renegotiation or cancellation of vendor agreements.
The one thing that is right at the moment is the short haul fleet. Areas of concern focus more closely on a medium range wide body candidate- so that we can get out of putting 342’s onto thinner long haul routes as well as increasing our utilization of wide bodies domestically( during peak periods so as to take advantage of the slots we have at peak times) and regionally where we would like to up the ante in the business class cabin and introduce our lie flat product.
SAA has no problem generating revenue- the issue is about too much dead wood dragging the business down- the political will now exists (finally!!!) to do something about the head count- this will not only cut costs but will also send a message out to those who remain that this is not a holiday camp- you either do your job or get cut