SAA - the bottomless pit
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Any chance this is an elaborate ruse to devalue SAA and setup a take over from an international carrier??? Who is the CEO wining and dining with on his eloborate travelling arrangements???
The days of national carriers are fast dwindling. The concept of a handful of intercontinental carriers (5 to 6) is fast approaching. This concept has also been applied to ATC service providers.
Some food for thought!
RP
The days of national carriers are fast dwindling. The concept of a handful of intercontinental carriers (5 to 6) is fast approaching. This concept has also been applied to ATC service providers.
Some food for thought!
RP
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"Oh, and I forgot to mention....I already earn just about nothing, so whatever happens to SAA will really not affect me, unless all the established, married with kids, happy at home, SAA pilots suddenly decide , " To hell with the big jets and the cushy life, we are going to fly contracts now." Somehow I doubt....."
Ha ha, well said I.R.P!
As if SAA pilots would suddenly compete for contract jobs! Although unfortunately we'd all end up stuck out there for even longer..... 
Ha ha, well said I.R.P!
As if SAA pilots would suddenly compete for contract jobs! Although unfortunately we'd all end up stuck out there for even longer.....
Paxing All Over The World
The last two carriers to do this, although unwillingly, were Swiss Air (Swiss) and Sabena (Brussels SN). I don't think that it is a good path.
However ... I have long subscribed to the view that we are going to have a few mega carriers, just as soon as countries allow themselves to give up the idea of a 'flag carrying airline'. We no longer have one in the UK, as the former national airline is now a publically owned company - albeit the rules still state 51% majority UK owned. But that is paper only.
When the costs finally get too much (people like KLM/AF are high up the list to learn the hard way) then the new mega carriers will be formed around the existing alliances: One World, Star Alliance, Sky Team and so on. Since Africa has clearly demonstrated that it does not want/cannot provide (you choose) an integrated and harmonius network of hubs for the continent, SAA need to ensure that they are well inside any of the large alliances before it is too late.
That said, I reckon SAA have another couple of years to go before they are in real trouble. The desire of the new owners (Mbeki and Co) to show that they can run an airline (oh yes, and a country) are strong enough to keep SAA alive. For the time being.
However ... I have long subscribed to the view that we are going to have a few mega carriers, just as soon as countries allow themselves to give up the idea of a 'flag carrying airline'. We no longer have one in the UK, as the former national airline is now a publically owned company - albeit the rules still state 51% majority UK owned. But that is paper only.
When the costs finally get too much (people like KLM/AF are high up the list to learn the hard way) then the new mega carriers will be formed around the existing alliances: One World, Star Alliance, Sky Team and so on. Since Africa has clearly demonstrated that it does not want/cannot provide (you choose) an integrated and harmonius network of hubs for the continent, SAA need to ensure that they are well inside any of the large alliances before it is too late.
That said, I reckon SAA have another couple of years to go before they are in real trouble. The desire of the new owners (Mbeki and Co) to show that they can run an airline (oh yes, and a country) are strong enough to keep SAA alive. For the time being.
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George Tower,
I agree with the concept of fleet continuity for short-haul operations - it makes sense for so many reasons. As far as long-haul ops are concerned, it becomes horses-for-courses.
The A343 is not a 'crap machine'. It was just incorrectly utilised by SAA. Many, many operators use it in conjunction with other types, i.e. Cathay, Air France, Lufthansa, etc. I guess SAA couldn't resist the price at which they were offered them.
As far as leasing them at a lesser price to a more established carrier (i.e. Jet Airways as opposed to Sahara) - not a bad move, especially if you want to see your money at the end of the day. Sahara currently own a handful of old 737s - not exactly great collateral when talking about a lease for $3 million.
I agree with the concept of fleet continuity for short-haul operations - it makes sense for so many reasons. As far as long-haul ops are concerned, it becomes horses-for-courses.
The A343 is not a 'crap machine'. It was just incorrectly utilised by SAA. Many, many operators use it in conjunction with other types, i.e. Cathay, Air France, Lufthansa, etc. I guess SAA couldn't resist the price at which they were offered them.
As far as leasing them at a lesser price to a more established carrier (i.e. Jet Airways as opposed to Sahara) - not a bad move, especially if you want to see your money at the end of the day. Sahara currently own a handful of old 737s - not exactly great collateral when talking about a lease for $3 million.
Last edited by journeyman; 28th Jul 2005 at 11:59.
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SAA- the national debt
This article appeared in Moneyweb on 10 January 2006. Say no more..............its worth reading it all!!Makes one think.......again.
Why SAA belongs in private hands
Jasson Urbach
Posted: Tue, 10 Jan 2006 08:00 | © Moneyweb Holdings Limited, 1997-2005
Soapbox is a section for articles written by guest contributors. The views expressed are those of the contributors and not necessarily shared by Moneyweb. Feel free to have your say on their views - as with all articles published on Moneyweb - below.
‘What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others’. Aristotle
Has anyone read an economic textbook lately that recommends subsidising the wealthy? Researchers wishing to know how it is done should examine the operations of South African Airways (SAA). They subsidise wealthy passengers, which flies in the face of both rational economics and social policy.
Most of SAA’s passengers are discerning business people who value the frequency, convenience, punctuality and reliability of flights. However, according to the latest financial release, [COLOR="Red"]SAA recorded an operating loss of R240m. If government covers the loss, as it has done in the past, taxpayers will be subsidising affluent people who don’t fly on low cost carriers.
Adam Smith, David Hume and other eighteenth and nineteenth century thinkers advanced the case for individual freedom and private enterprise economies. They advocated a system where individuals have the freedom to make the vast majority of decisions that affect them. This preference does not assume that people are always rational and seldom make mistakes, but only that the great majority of people are more rational and make fewer mistakes in promoting their own interests than well-intentioned government officials.
Privatisation of government services has been used successfully in the UK and a number of countries to decrease the financial and administrative burden on scarce public resources, improve quality, and reduce prices. The increase in privatisation of state-owned assets has not been exclusive to developed countries. Indeed, the World Bank notes that from 1988 to 2003 there have been over 9 000 cases of privatisation in developing countries. The reason why both developed and developing countries are actively pursuing privatisation is not hard to understand: privatisation works!
Privatisation involves delegating to the private sector functions, responsibilities and activities that have traditionally been carried out by the public sector. A key principle of privatisation is that, under most conditions, private firms provide better, more client-oriented services at lower cost than public sector suppliers are capable of doing. Indeed, the services for which a clear-cut case remains for state provision are rapidly diminishing in number.
According to a 1997 study by National Economic Research Associates (NERA), in the first year of Margaret Thatcher’s government (ie, 1979-80) 33 state enterprises, all later to be privatised, absorbed Ł500m of public funds as well as more than Ł1bn in loan finance. By 1987, these same companies were contributing Ł8bn a year to the Treasury in share sales, tax receipts and dividends. New Zealand has also carried out a privatisation programme that has significantly reduced government expenditure from 42% to 35% of GDP over a ten-year period. These dramatic savings were in part due to reducing the size of the civil service by more than one half.
During 1999/2000 SAA was partly privatised and the SA government received an estimated R1,4bn for the sale of a 20% stake in the company to Swissair. That revenue was small comfort because in 2004 SAA posted a record pre-tax loss of R8,7bn, largely the result of hedging against possible depreciation of the rand. Subsequently, when the rand strengthened the book was closed, costing taxpayers approximately R5,9bn. Furthermore, during 1999/2000 government’s burden-sharing agreement settled pension fund shortfalls attributable to SAA costing taxpayers R1, 3bn. A private airline would have disappeared into oblivion: taken over or liquidated.
Subsequently when Swissair collapsed, Transnet bought back its former partner’s shares and currently has a 95% shareholding. However, does it really make sense to continue to divert scarce resources away from schools, hospitals and other social priorities to enable government to keep trying to run a loss-making airline? Why not sell off the rest of the airline in a public auction to the highest bidder? Alternatively, use the shares for the empowerment of the poor. This could bring swift benefits to those who need it most. The latest labour force survey in SA showed that the most affected section of the population is black, with about 45% of households in the lowest two income quintiles having no income earners.
The national carrier, as well as its sister outfit, SA Express, (both owned by transport parastatal Transnet), have not taken any significant steps to cut costs in the face of the rise of the low cost carriers. Rather, SAA has noted that it is not a low-cost carrier and therefore has no reason to change its market positioning.
Indeed, there is no obvious reason for SAA to improve its services because the government will always be available to bail it out. Furthermore, the currently preferred policy of forming public-private partnerships (PPPs), does not offer a fundamental solution to the problem. These quasi-privatisations have significant drawbacks since they shirk responsibility and decrease incentives. No government or parastatal should be in the airline business and the sooner SAA is sold the better it will be for all South Africa’s citizens.
Author: Jasson Urbach is a research economist with the Free Market Foundation. The views expressed in the article are the author’s and are not necessarily shared by the members of the Free Market Foundation.
Why SAA belongs in private hands
Jasson Urbach
Posted: Tue, 10 Jan 2006 08:00 | © Moneyweb Holdings Limited, 1997-2005
Soapbox is a section for articles written by guest contributors. The views expressed are those of the contributors and not necessarily shared by Moneyweb. Feel free to have your say on their views - as with all articles published on Moneyweb - below.
‘What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others’. Aristotle
Has anyone read an economic textbook lately that recommends subsidising the wealthy? Researchers wishing to know how it is done should examine the operations of South African Airways (SAA). They subsidise wealthy passengers, which flies in the face of both rational economics and social policy.
Most of SAA’s passengers are discerning business people who value the frequency, convenience, punctuality and reliability of flights. However, according to the latest financial release, [COLOR="Red"]SAA recorded an operating loss of R240m. If government covers the loss, as it has done in the past, taxpayers will be subsidising affluent people who don’t fly on low cost carriers.
Adam Smith, David Hume and other eighteenth and nineteenth century thinkers advanced the case for individual freedom and private enterprise economies. They advocated a system where individuals have the freedom to make the vast majority of decisions that affect them. This preference does not assume that people are always rational and seldom make mistakes, but only that the great majority of people are more rational and make fewer mistakes in promoting their own interests than well-intentioned government officials.
Privatisation of government services has been used successfully in the UK and a number of countries to decrease the financial and administrative burden on scarce public resources, improve quality, and reduce prices. The increase in privatisation of state-owned assets has not been exclusive to developed countries. Indeed, the World Bank notes that from 1988 to 2003 there have been over 9 000 cases of privatisation in developing countries. The reason why both developed and developing countries are actively pursuing privatisation is not hard to understand: privatisation works!
Privatisation involves delegating to the private sector functions, responsibilities and activities that have traditionally been carried out by the public sector. A key principle of privatisation is that, under most conditions, private firms provide better, more client-oriented services at lower cost than public sector suppliers are capable of doing. Indeed, the services for which a clear-cut case remains for state provision are rapidly diminishing in number.
According to a 1997 study by National Economic Research Associates (NERA), in the first year of Margaret Thatcher’s government (ie, 1979-80) 33 state enterprises, all later to be privatised, absorbed Ł500m of public funds as well as more than Ł1bn in loan finance. By 1987, these same companies were contributing Ł8bn a year to the Treasury in share sales, tax receipts and dividends. New Zealand has also carried out a privatisation programme that has significantly reduced government expenditure from 42% to 35% of GDP over a ten-year period. These dramatic savings were in part due to reducing the size of the civil service by more than one half.
During 1999/2000 SAA was partly privatised and the SA government received an estimated R1,4bn for the sale of a 20% stake in the company to Swissair. That revenue was small comfort because in 2004 SAA posted a record pre-tax loss of R8,7bn, largely the result of hedging against possible depreciation of the rand. Subsequently, when the rand strengthened the book was closed, costing taxpayers approximately R5,9bn. Furthermore, during 1999/2000 government’s burden-sharing agreement settled pension fund shortfalls attributable to SAA costing taxpayers R1, 3bn. A private airline would have disappeared into oblivion: taken over or liquidated.
Subsequently when Swissair collapsed, Transnet bought back its former partner’s shares and currently has a 95% shareholding. However, does it really make sense to continue to divert scarce resources away from schools, hospitals and other social priorities to enable government to keep trying to run a loss-making airline? Why not sell off the rest of the airline in a public auction to the highest bidder? Alternatively, use the shares for the empowerment of the poor. This could bring swift benefits to those who need it most. The latest labour force survey in SA showed that the most affected section of the population is black, with about 45% of households in the lowest two income quintiles having no income earners.
The national carrier, as well as its sister outfit, SA Express, (both owned by transport parastatal Transnet), have not taken any significant steps to cut costs in the face of the rise of the low cost carriers. Rather, SAA has noted that it is not a low-cost carrier and therefore has no reason to change its market positioning.
Indeed, there is no obvious reason for SAA to improve its services because the government will always be available to bail it out. Furthermore, the currently preferred policy of forming public-private partnerships (PPPs), does not offer a fundamental solution to the problem. These quasi-privatisations have significant drawbacks since they shirk responsibility and decrease incentives. No government or parastatal should be in the airline business and the sooner SAA is sold the better it will be for all South Africa’s citizens.
Author: Jasson Urbach is a research economist with the Free Market Foundation. The views expressed in the article are the author’s and are not necessarily shared by the members of the Free Market Foundation.
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Re: SAA- the national debt
And to top it all off, we are paying the salaries of the distinguished flyers, in a company who doesnt even look at our Cv's. Sheesh, never thought of it like that before. Enjoy the BM's and all the other toys we're buying for you.
I.R going to sit in the corner and play with the only toy I have.....
I.R going to sit in the corner and play with the only toy I have.....
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SAA to axe over a 1000 staff
SAA to axe over a 1000 staff across all spectrums before December 2007!!!!! According to the report SAA has too many staff, about 2000 to 3000.
Ops expenses over last 6 months = 10,5 Billion (Sep 06 profit = 2 Billion)
Nett loss 645 Million for the year sofar................
Well, well, here they go again………………hope they start cleaning from the top down...........who employed all the "additional" staff..........
They also released a statement about adding 9, yes 9 wide body aircraft to its fleet for new destinations in the USA, South America, Africa, Japan and China. More destinations, expanding fleet and cutting staff……………….something sounds fishy….??????????
Maybe new life in AA policies???????????
E
Ops expenses over last 6 months = 10,5 Billion (Sep 06 profit = 2 Billion)
Nett loss 645 Million for the year sofar................
Well, well, here they go again………………hope they start cleaning from the top down...........who employed all the "additional" staff..........
They also released a statement about adding 9, yes 9 wide body aircraft to its fleet for new destinations in the USA, South America, Africa, Japan and China. More destinations, expanding fleet and cutting staff……………….something sounds fishy….??????????
Maybe new life in AA policies???????????
E
Last edited by ERASER; 1st Dec 2006 at 06:12.
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Oh, wonderful. So now it will take even longer to check in at JNB. They don't have enough check-in staff as it is. Perhaps they should just redeploy some managers to the check-in counters!
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SAA International
I think that is a good point!!!
SAA in the long run should drop all the domestic flying and only do international flights, they are the national carrier after-all.
Let them fly the SA flag around the world and not make money.
SAA in the long run should drop all the domestic flying and only do international flights, they are the national carrier after-all.
Let them fly the SA flag around the world and not make money.
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Don’t hold your breath……..heard a rumour that SAA is looking for more domestic Airbus (A319/320/321) aircraft to fill the gap left by the 4 departing B738’s (Mango)….....
They are also looking at the Boeing 787for the international routes………….a very close look from what I heard.
E
PS - Just hope my buddies make it thru the 1000 + staff chop……………they are a bit pale and also male……a deadly combination!!!!
They are also looking at the Boeing 787for the international routes………….a very close look from what I heard.
E
PS - Just hope my buddies make it thru the 1000 + staff chop……………they are a bit pale and also male……a deadly combination!!!!
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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.
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.
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How about Ryanair who have aprofit margin of between 21% and 26% (Highest in the World), using Boeing 737-800's..?
When all orders are honoured Ryanair will have in the region of 400 738's.
The Rot is in the support and service functions, not in the aircraft
When all orders are honoured Ryanair will have in the region of 400 738's.
The Rot is in the support and service functions, not in the aircraft
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I tell you, when one reads all there is to read on these threads and posts relating to SAA / Mango - what with retrenchments, management issues, service issues, fines etc., it makes my job as an MD within the General Aviation community seem like a cruise on the Zambesi sipping cocktails at sunset. Maybe it's the wine that's given me the grey hair and not running an aviation business Boy, what a mess they're in. Glad I don't have to report these issues to MY Board.
Boy, what a mess they're in. Glad I don't have to report these issues to MY Board.
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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.
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.
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
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I tell you, when one reads all there is to read on these threads and posts relating to SAA / Mango - what with retrenchments, management issues, service issues, fines etc., it makes my job as an MD within the General Aviation community seem like a cruise on the Zambesi sipping cocktails at sunset. Maybe it's the wine that's given me the grey hair and not running an aviation business Boy, what a mess they're in. Glad I don't have to report these issues to MY Board.
Boy, what a mess they're in. Glad I don't have to report these issues to MY Board.Join Date: Jan 2003
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Are you perhaps referring to Washington (now operated by A346's) or Cape Town-London which seems to alternate between A346's and B744's?
No hidden agenda's or anything, just curious (PM me if you wish)
Paxing All Over The World
Q4NVS
You know that is no kind of comparison!! If you want to compare, say, Ford Motor Company with all of it's history and baggage with, say, Kia of Korea that have emerged in the last few years - then you would also get a false answer.
SAA is in the same situation as all other nationalised carriers. Most have now been privatised and the rest are on their way and SAA will eventually follow. Comparing their profits to that of RyanAir shows a lack of understanding of commercial airlines, or, wilfull misrepresentation.
How about Ryanair who have a profit margin of between 21% and 26% (Highest in the World), using Boeing 737-800's..?
SAA is in the same situation as all other nationalised carriers. Most have now been privatised and the rest are on their way and SAA will eventually follow. Comparing their profits to that of RyanAir shows a lack of understanding of commercial airlines, or, wilfull misrepresentation.
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Q4NVS
You know that is no kind of comparison!! If you want to compare, say, Ford Motor Company with all of it's history and baggage with, say, Kia of Korea that have emerged in the last few years - then you would also get a false answer.
SAA is in the same situation as all other nationalised carriers. Most have now been privatised and the rest are on their way and SAA will eventually follow. Comparing their profits to that of RyanAir shows a lack of understanding of commercial airlines, or, wilfull misrepresentation.
You know that is no kind of comparison!! If you want to compare, say, Ford Motor Company with all of it's history and baggage with, say, Kia of Korea that have emerged in the last few years - then you would also get a false answer.
SAA is in the same situation as all other nationalised carriers. Most have now been privatised and the rest are on their way and SAA will eventually follow. Comparing their profits to that of RyanAir shows a lack of understanding of commercial airlines, or, wilfull misrepresentation.
Aside from that when talking about the fleet- the issues range from cabin layout- this is where the 744 is really killed in terms of profit potential ( our current config gives us about 30 to 40 seats less in the back then say Air New Zealand has) I’m not even talking about leases or anything else. The aircraft is operated on a route that is in a price war- so all the seats in the back ore going cheap- if you do that then you need to increase the number of seats you have in the cabin or get a cheaper aircraft to operate.
Problem is you are always playing a juggling act- replace the 744 with a 346 and your cargo revenue goes down- replace it with a 342 and you get 30 less seats at the sharp end to sell (we have no problem selling those at really excellent yields) and you get no cargo. The game goes on and on- Im not having a go at the 744 here- in fact the pax prefer it to the bus. The challenge is are we willing to make the investment the fleet we have to make it “do the business” the simple answer is no. After the investment all the other negative issues come into play and the net effect is only a marginal improvement plus we get the issues of having “odd birds” in the fleet ie ones set up for only one route- that going to effect your utilization- something the 744 fleet doesn’t suffer from thanks to its application on certain African routes during the day.
Each type in the fleet suffers to a greater or lesser degree from what Ive mentioned about the 744- its all about harmonising your route network and your fleet- we are 60% of the way there and within a few years Im sure we will have the problem licked. About the best “no brainer” we have are the 738’s -great equipment, Im less enthusiastic about the 319’s if they were equipped from the start properly then all those good things in terms of common flight decks and the associated cost saving in terms of conversions would be true.