Mango - all you need to know about it (threads merged)
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Originally Posted by Deskjocky
Furthermore SAA’s market share will not be cannibalised- the whole point of this exercise is to segment the market according to what the customer is prepared to pay- if you want “cheap and cheerful” then the new LCC will speak to that need. If you want a full service premium brand with all the associated benefits then fly on SAA mainline. After all how can you justify charging a customer- like a corporate, a higher price for all the extras when the person sitting next to him paid 50% less on the internet and gets the same service. The LCC will protect SAA’s premium revenue stream. In effect all the cheap seats currently being sold on flysaa.com will be transferred to the LCC.
If the cheap tickets sold on flysaa.com will just be transfered, then there is collusion.
SAA already has to pay millions in fines for "unfair trading", will they ever learn????
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LCC is definitely going to fly, SAA’s schedule has been amended to exclude the 4 738’s already. As far as corporate governance is concerned this deal has been cleared all the way from the SAA Board- where all stakeholders are represented to the highest levels of government.
Many have tried this Low cost before and failed, what makes you think that the current SAA management with there dismal performance past and present are better than the others that have gone before them.
In true SAA style I believe the current R600 mil loss that was to be posted (just before salary negotiations) has turned into a small profit, due to a hedging fund law that changed how much cash you can keep in the hedging fund..............and true to form, what did management do, recapitalise? purchase new aircraft? no they gave themselves bonuses.
Good luck SAA low cost.
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Well said Fluffyfan. They ought to have an A340 formation flypast towing a banner to advertise, or better still, lease more of their 738's to other LCC's, as it is obviously a good deal !!!!!!!!!!!!!!!!!!!!!!!!!!
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[QUOTE]
SAA will make money out of the LCC - it has to pay for all services rendered like technical and simulator hire at prevailing market rates there is not going to be any preferential treatment. That includes aircraft lease agreements.
The leases are not that onerous provided the aircraft have the right seating config and utilization and you have commonality across the fleet.
There seems to be this perception in South Africa that you cannot make money with new aircraft- what a load of BS! 
Its all about choosing the right aircraft for the job- the 738 was invented for high capacity high density short haul market.
In terms of MN and 1T using aircraft worth 1 million- according to fluffy- they are slowly realizing that unless you make the investment you will not succeed.
Post 9/11 the market became awash with cheap metal as airlines offloaded old technology- some to reduce capacity and others in favour of new metal that was being offered at really attractive prices from the manufactures. This has made the barrier to entry into the market really low to any new entrant- go to the desert buy up a bunch of 60’s era aircraft and apply for a license. All good and well to start, take on the legacy carriers in the market and undercut them using this cost advantage- problem is this is all short-sighted because there is never enough money to invest in newer technology. (I truly wonder what the market capitalisation was of 1T was when it launched- I bet you it wasn’t more than 10 Million Rand) Herein lies the time bomb, cheap aircraft will only take you so far before they become a millstone around your neck. Ironically this will pose a greater risk to carriers like 1T and CE than SAA ever will, as you add capacity your costs rise but revenue does not increase by the same increment- the operation is dragged down by greater operational costs, its just a spiral from there.
I once worked out the break even (based on DOC assuming a nil capital cost) for a friend who flies for one of the private carriers- the aircraft is used sparingly because its old- even with a 100% load factor (using a higher weighted average fare than I know they earn in reality) every time the aircraft pushed back it lost the airline 10K. I’m still amazed when I see the aircraft on the ramp on a regular basis but they are in a trap- they have the fares to attract the pax but they cant make any return because the aircraft is a dog but they don’t want to not operate because the traffic will gravitate to one of its competitors- making them stronger. What kind of logic is that???? Its ok if this were an isolated case but have a look at the aircraft being operated- this is not a unique example.
Originally Posted by fluffyfan
It may fly, but for how long, please explain how a company using 40 million US$ aircraft on a balloon payment lease agreement can compete against a company that has a true interest in making a profit ie 1time and Kulula using aircraft that cost 1 million$, its all smoke and mirrors, chinese book keeping I think, let me guess SAA will keep paying the lease while the profit is refelected on the low cost balance sheet, how long before the competition board who already dislike SAA shut it down.
The leases are not that onerous provided the aircraft have the right seating config and utilization and you have commonality across the fleet.
There seems to be this perception in South Africa that you cannot make money with new aircraft- what a load of BS!
Its all about choosing the right aircraft for the job- the 738 was invented for high capacity high density short haul market. In terms of MN and 1T using aircraft worth 1 million- according to fluffy- they are slowly realizing that unless you make the investment you will not succeed.
Post 9/11 the market became awash with cheap metal as airlines offloaded old technology- some to reduce capacity and others in favour of new metal that was being offered at really attractive prices from the manufactures. This has made the barrier to entry into the market really low to any new entrant- go to the desert buy up a bunch of 60’s era aircraft and apply for a license. All good and well to start, take on the legacy carriers in the market and undercut them using this cost advantage- problem is this is all short-sighted because there is never enough money to invest in newer technology. (I truly wonder what the market capitalisation was of 1T was when it launched- I bet you it wasn’t more than 10 Million Rand) Herein lies the time bomb, cheap aircraft will only take you so far before they become a millstone around your neck. Ironically this will pose a greater risk to carriers like 1T and CE than SAA ever will, as you add capacity your costs rise but revenue does not increase by the same increment- the operation is dragged down by greater operational costs, its just a spiral from there.
I once worked out the break even (based on DOC assuming a nil capital cost) for a friend who flies for one of the private carriers- the aircraft is used sparingly because its old- even with a 100% load factor (using a higher weighted average fare than I know they earn in reality) every time the aircraft pushed back it lost the airline 10K. I’m still amazed when I see the aircraft on the ramp on a regular basis but they are in a trap- they have the fares to attract the pax but they cant make any return because the aircraft is a dog but they don’t want to not operate because the traffic will gravitate to one of its competitors- making them stronger. What kind of logic is that???? Its ok if this were an isolated case but have a look at the aircraft being operated- this is not a unique example.
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Well said DJ!
There is no such thing as an older aircraft being more economical than a new one, why do we think are the new one's being built..?
Case in Point:
Ryanair has ordered 143 x 738-800's, NOT old school Gas Guslers like MD's, DC9's or 732's..?
Short term investment is BIGGER, but hey, once they've got the metal, there's no catching them...
With the forecasted 2006 Fuel Bill occupying 26% of an airlines total expenses, versus 22% in 2005, the 1T's and even Kulula's better start making plans.
Here's the thing - Public perception always is that because these LCC's are always pretty full, they must be making money - NOT necessarily.
However, some later generation aircraft can operate with load factors sometimes as low as 35% to break even. Now those are the REAL LCC tools to collect, but hey, none of them are 60's 70's or even 80's models.
There is no such thing as an older aircraft being more economical than a new one, why do we think are the new one's being built..?
Case in Point:
Ryanair has ordered 143 x 738-800's, NOT old school Gas Guslers like MD's, DC9's or 732's..?
Short term investment is BIGGER, but hey, once they've got the metal, there's no catching them...
With the forecasted 2006 Fuel Bill occupying 26% of an airlines total expenses, versus 22% in 2005, the 1T's and even Kulula's better start making plans.
Here's the thing - Public perception always is that because these LCC's are always pretty full, they must be making money - NOT necessarily.
However, some later generation aircraft can operate with load factors sometimes as low as 35% to break even. Now those are the REAL LCC tools to collect, but hey, none of them are 60's 70's or even 80's models.
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Back to Original Question
Where to apply?
Unfortunately DA, there are only a number of rumours at the moment, nothing seen in writing yet...
This is the latest one, that I am aware of atleast:
Will be run on a 3 year contract basis, with P1's being offered to current SAA SFO's with P2's probably coming from SAX. Upon completion of 3 year contract, you have the choice to renew for another 3 years, or return to your original Seniority Position within SAA/SAX respectively.
Dunno what the guys at SAX are saying, as they are believed to be expanding at such a rate at the moment, that there might not even be enough crew to dish out...
Don't shoot the messenger though
Unfortunately DA, there are only a number of rumours at the moment, nothing seen in writing yet...
This is the latest one, that I am aware of atleast:
Will be run on a 3 year contract basis, with P1's being offered to current SAA SFO's with P2's probably coming from SAX. Upon completion of 3 year contract, you have the choice to renew for another 3 years, or return to your original Seniority Position within SAA/SAX respectively.
Dunno what the guys at SAX are saying, as they are believed to be expanding at such a rate at the moment, that there might not even be enough crew to dish out...
Don't shoot the messenger though
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Originally Posted by Q4NVS
you have the choice to renew for another 3 years, or return to your original Seniority Position within SAA/SAX respectively.
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Originally Posted by reptile
......once you leave your seniority position at SAX (I cannot speak for SAA and SAAPA) you've lost your position.
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This is a Rumour network and I also received it as 2nd hand gen anyway.
My personal opinion (what I would stand or vote 4
...) = Exactly what you say Reptile.
If the grass is greaner (or the metal Heavier), go sample it, but when you return, do so at your own expense . Wouldn't be fair to put all those behind you on hold, would it.
Hey me, I just watch the "Show"
My personal opinion (what I would stand or vote 4
...) = Exactly what you say Reptile.If the grass is greaner (or the metal Heavier), go sample it, but when you return, do so at your own expense
. Wouldn't be fair to put all those behind you on hold, would it.Hey me, I just watch the "Show"
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Deskjocky, what you say does make sense, and I truly hope it succeeds, it can only be a good thing, however I am sceptical, just blame it on a legacy of the past where every management team has had there own agenda's and raped SAA to there own advantage.
You seem to be implying that this management team is different, only time will tell, unfortunatley no matter which way you swing it you cant tell me SAA is not shrinking, 3 800's on contract in Europe (ok this does happen every year) now 4 going to LCC, 3 band new A340-300 in India (coming back soon...we hope), now rumours that the 747-400's cant make money, with 2 already gone to Cathay to become freighters, this all happening in a time of unpresidented growth around the world in terms of airlines, there are no plans for new aircraft, no orders, no new routes, apparently the government (another rumour) has directed that SAA must expand at 10% for the next 4 years until 2010, how is this even possible when we are giving aircraft away (giving them away.....another rumour about the 400's being sold for $15 mil each and it cost $19 mil to zero the engines), SAA should be flying to Madrid, Amterdam, Bangkok, Sydney, Lisbon, Beijing, etc but its not, why, management has found a way to screw SAA time and time again, SAA is not in the business of making a profit, its a government tool, to wave the South African flag in obscure African countries, to employ thousands of people, to provide themselves and there extended families with free public transport and to provide a platform for them to test there BEE policies.
But then again, I am probably wrong, I hope I am and I hope SAA succeeds.
You seem to be implying that this management team is different, only time will tell, unfortunatley no matter which way you swing it you cant tell me SAA is not shrinking, 3 800's on contract in Europe (ok this does happen every year) now 4 going to LCC, 3 band new A340-300 in India (coming back soon...we hope), now rumours that the 747-400's cant make money, with 2 already gone to Cathay to become freighters, this all happening in a time of unpresidented growth around the world in terms of airlines, there are no plans for new aircraft, no orders, no new routes, apparently the government (another rumour) has directed that SAA must expand at 10% for the next 4 years until 2010, how is this even possible when we are giving aircraft away (giving them away.....another rumour about the 400's being sold for $15 mil each and it cost $19 mil to zero the engines), SAA should be flying to Madrid, Amterdam, Bangkok, Sydney, Lisbon, Beijing, etc but its not, why, management has found a way to screw SAA time and time again, SAA is not in the business of making a profit, its a government tool, to wave the South African flag in obscure African countries, to employ thousands of people, to provide themselves and there extended families with free public transport and to provide a platform for them to test there BEE policies.
But then again, I am probably wrong, I hope I am and I hope SAA succeeds.
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Fluffy, much of what you bring up has some truth to it. SAA is run as an instrument of the state- this is a fact. The problem is the people who have oversight over SAA know nothing about aviation- therefore they place all sorts of demands on the table that are for the most part unrealistic and then expect the airline to turn a profit. I can go on all day with examples but the Washington debacle is a good one. All politics no profit. I always laugh when top management go to parliament- they get grilled for 2 hours about why there is not enough profit and then when everyone is finished and having coffee outside the self same members of parliament come up to them and demand to know why SAA is not flying to this or that African state and my personal favourite: why does East London not get as many flights as Cape Town does……….mmmmmmm….. wonder why….. Im not saying that management is blameless but they have a difficult enough job (given the fact that they themselves are all political appointees and therefore have zero aviation knowledge) without all the interference. This situation is exacerbated by the fact that they distrust the management level below them- for largely historical reasons that there is no point in going into now. So any fresh and innovative ideas that are based on sound market analysis are swatted flat as they lack the insight to appreciate the gravity of the situation the airline is now in. Route expansion scares the heck out of them as if it goes wrong then their cushy life of doing zip is over. Its far easier to make no decision than take a risk. That’s why all the emphasis on subleasing the fleet out- its nice and safe and you can put a number against that initiative in their fancy Mickinsey power point slide. They don’t understand that aircraft leases are only part of the fixed cost base. The only way to thrive is to expand- hopefully one day the managers who keep producing the goods will be heard!
Good news on the A343’s they all come back next year, the 738’s leased to Transavia return at the end of the northern summer. Its true, the 744 is an absolute dog at the moment to make money from- expect to see an increase in the pace of withdrawal from service. However this capacity will need to be replaced and there are some very interesting discussions on the go.
Proposals have also been submitted to the board for new routes to Northern and Southern Europe this is to primarily tie in with the STAR partner networks there- these will be dependant on the availability of suitable capacity. A revised North America strategy is also awaiting approval. All this is obviously dependant on what the political will will be!
Good news on the A343’s they all come back next year, the 738’s leased to Transavia return at the end of the northern summer. Its true, the 744 is an absolute dog at the moment to make money from- expect to see an increase in the pace of withdrawal from service. However this capacity will need to be replaced and there are some very interesting discussions on the go.
Proposals have also been submitted to the board for new routes to Northern and Southern Europe this is to primarily tie in with the STAR partner networks there- these will be dependant on the availability of suitable capacity. A revised North America strategy is also awaiting approval. All this is obviously dependant on what the political will will be!
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the 744 is an absolute dog at the moment to make money from- expect to see an increase in the pace of withdrawal from service. However this capacity will need to be replaced and there are some very interesting discussions on the go.
I think the current World cup Soccer will have a big influence on us as well, the powers dont want to look bad in the eyes of the world in 4 years time and hey , they have the German example to follow...of all the people it could have been............... it the Germans....
, lets just hope the right descisions are made and not panic buying
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Coming back to the LCC saga.
Its a total waste of money. Many other full service operators (including BA) have tried this already and failed dismally. All of a sudden SAA has a "new" idea that's never been tried before. When will they learn!!!!!!
I know, I know, its going to be a separate entity, blah, blah, blah. What a lot of rubbish! It will have to be financed by SAA using SAA's assets to secure that financing. No matter which way you look at it, if one company is solely owned by another company, doing the same thing, then they are one and the same company bull****ting each other that they are two separate entities. Much like Kulula and Comair trying to pretend that they are separate airlines. Same pilots, same aeroplanes, same everything, oops sorry different uniform, that makes it different!!!!!!!???? Yeah right!!!!!!!!!!!!
I am convinced that no good will come of this if it happens. It will not be good for the industry, as it will put it under more strain than it already is. It will not be good for SAA, as it relies on the fact that passengers have to leave other airlines (including SAA) to fly on this start up, thinning the loads.
It will not be good for the consumer, as the ticket price will not reduce much more than they already are, but somewhere in the future, someone will hold a ticket on another Sun Air, Phoenix, etc, etc.................
Its a total waste of money. Many other full service operators (including BA) have tried this already and failed dismally. All of a sudden SAA has a "new" idea that's never been tried before. When will they learn!!!!!!
I know, I know, its going to be a separate entity, blah, blah, blah. What a lot of rubbish! It will have to be financed by SAA using SAA's assets to secure that financing. No matter which way you look at it, if one company is solely owned by another company, doing the same thing, then they are one and the same company bull****ting each other that they are two separate entities. Much like Kulula and Comair trying to pretend that they are separate airlines. Same pilots, same aeroplanes, same everything, oops sorry different uniform, that makes it different!!!!!!!???? Yeah right!!!!!!!!!!!!
I am convinced that no good will come of this if it happens. It will not be good for the industry, as it will put it under more strain than it already is. It will not be good for SAA, as it relies on the fact that passengers have to leave other airlines (including SAA) to fly on this start up, thinning the loads.
It will not be good for the consumer, as the ticket price will not reduce much more than they already are, but somewhere in the future, someone will hold a ticket on another Sun Air, Phoenix, etc, etc.................
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Saywhat, just to add that at no time has Comair ever stated that Kulula is separated from the company Comair. Whether it be the BA brand or Kulula brand, it is always "proudly operated" by Comair.
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Yes you are right, I stand corrected.
I found this in the busisess report, makes some interesting reading.
I found this in the busisess report, makes some interesting reading.
SAA may be heading for turbulence in the low-cost skies
April 28, 2006
By Jabulani Sikhakhane, Tonny Mafu and Thabiso Mochiko
SAA's move into the low-cost market could backfire on the state-owned airline company. SAA, which is in the early stages of nursing its finances into a healthy position, said early last month that it would launch a low-cost airline before the end of the year.
But if the experience of traditional European airlines in venturing into the low-cost market is anything to go by, SAA could be flying into some turbulence.
SAA's launch of a low-cost airline operation is in response to the success of low-cost airlines in South Africa, which have reportedly gobbled up 25 percent of the domestic air travel market.
The European industry went through a similar phase in the mid-1990s after the success of low-cost carriers such as Ryanair and easyJet. Traditional airlines responded by launching their own low-cost operations. British Airways (BA) moved first, launching Go in 1998, followed by KLM, which launched Buzz in 2000.
BA bailed out of the low-cost market in 2001, selling Go to 3i, a private equity fund, which later sold Go to easyJet for almost three times what it paid BA. KLM sold Buzz to Ryanair in 2003.
The success of low-cost airlines stems from the fact that they stimulate and exploit pent-up demand for cheap travel, according to a report by consulting firm McKinsey. Their entry into a market brings out people who would otherwise travel by train or car, if at all. Surveys indicate that up to three-quarters of these carriers' passengers aren't customers of other airlines, though the release of this demand benefits the whole airline industry, McKinsey says.
A similar pattern has emerged in South Africa after the launch of kulula.com and 1time.
But the first entrants in the low-cost market reap most of these benefits, leaving very little for new entrants. The first entrants can use low prices to stimulate demand and build brand power. Later entrants, with the same costs and prices as the first entrants, have a harder time generating the traffic they need to fill their planes.
The same fate may await SAA. - Jabulani Sikhakhane
April 28, 2006
By Jabulani Sikhakhane, Tonny Mafu and Thabiso Mochiko
SAA's move into the low-cost market could backfire on the state-owned airline company. SAA, which is in the early stages of nursing its finances into a healthy position, said early last month that it would launch a low-cost airline before the end of the year.
But if the experience of traditional European airlines in venturing into the low-cost market is anything to go by, SAA could be flying into some turbulence.
SAA's launch of a low-cost airline operation is in response to the success of low-cost airlines in South Africa, which have reportedly gobbled up 25 percent of the domestic air travel market.
The European industry went through a similar phase in the mid-1990s after the success of low-cost carriers such as Ryanair and easyJet. Traditional airlines responded by launching their own low-cost operations. British Airways (BA) moved first, launching Go in 1998, followed by KLM, which launched Buzz in 2000.
BA bailed out of the low-cost market in 2001, selling Go to 3i, a private equity fund, which later sold Go to easyJet for almost three times what it paid BA. KLM sold Buzz to Ryanair in 2003.
The success of low-cost airlines stems from the fact that they stimulate and exploit pent-up demand for cheap travel, according to a report by consulting firm McKinsey. Their entry into a market brings out people who would otherwise travel by train or car, if at all. Surveys indicate that up to three-quarters of these carriers' passengers aren't customers of other airlines, though the release of this demand benefits the whole airline industry, McKinsey says.
A similar pattern has emerged in South Africa after the launch of kulula.com and 1time.
But the first entrants in the low-cost market reap most of these benefits, leaving very little for new entrants. The first entrants can use low prices to stimulate demand and build brand power. Later entrants, with the same costs and prices as the first entrants, have a harder time generating the traffic they need to fill their planes.
The same fate may await SAA. - Jabulani Sikhakhane
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Currently SAA operates very few domestic routes off the Golden Triangle. Just JNB-PLZ and a few JNB-ELS. The rest of the domestic routes are covered by SAX and Link.
Don't you guys think that this LCC might be a precursor to SAA withdrawing all full service domestic flying and concentrating on Regional and International routes?
If the rumour is true that they are looking at 733 and 734 freighters, they might be able to accommodate all their current crew as well.
BTW, I am just speculating. I have no inside info.
Don't you guys think that this LCC might be a precursor to SAA withdrawing all full service domestic flying and concentrating on Regional and International routes?
If the rumour is true that they are looking at 733 and 734 freighters, they might be able to accommodate all their current crew as well.
BTW, I am just speculating. I have no inside info.
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the 744 is an absolute dog at the moment to make money from
If you refinance any aircraft enough times it will become a 'dog'. You can then conveniently blame all your troubles on it!
Apart from that, agree with your post, DJ
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Saywhat, I don' think you know what you're talking about.
Why would SAA start a LCC? Its all about costs reduction, SAA mainline costs are huge compared to an LCC. A simple example would be the bloated salaries and the turn around times of a 737, cut the time down to 25min and your asset utilisation increases thus our return on investment increases as well.
Now management can't just reduce SAA salaries, the unions will flip their lids, so they start an LCC, same as Jet Star in Australia. Sooner or later they will weed into the network and make more money as their costs are so much lower - that's what the stakeholders want - PROFIT. For those at SAA, profit is the revenue after all COSTS and tax are taken away, something not attained by doing fly pasts in aircraft that should be earning revenue !!!
By the way BA did make money with GO, they sold it onto easyJet who still utilise the routes - it just did not fit in with BA's future plans..
Why would SAA start a LCC? Its all about costs reduction, SAA mainline costs are huge compared to an LCC. A simple example would be the bloated salaries and the turn around times of a 737, cut the time down to 25min and your asset utilisation increases thus our return on investment increases as well.
Now management can't just reduce SAA salaries, the unions will flip their lids, so they start an LCC, same as Jet Star in Australia. Sooner or later they will weed into the network and make more money as their costs are so much lower - that's what the stakeholders want - PROFIT. For those at SAA, profit is the revenue after all COSTS and tax are taken away, something not attained by doing fly pasts in aircraft that should be earning revenue !!!
By the way BA did make money with GO, they sold it onto easyJet who still utilise the routes - it just did not fit in with BA's future plans..