What happens if SAA goes
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Local Long haul Carriers
There was a time in the late 90's when SAX went through a rocky patch but that’s well behind them now and I’ve no doubt they will go from strength to strength.
If SAA was not around, the only benefactors would be the international airlines flying into South Africa, the local airlines, trying to compete on long-haul routes, would be killed stone dead in no time at all
This notion we NEED a national flag carrier is so 1950's. I think the fact that the private airlines are still around despite government's best efforts proves they have what it takes.
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Pleeeze SAA, don't fold. All we need in the "sandpit" is an over supply of drivers to keep EK going. They love picking at the carcasses of dying airlines to keep their pilot numbers up - and pay scales down!!
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Comair already has plans for long haul fleet, hear they have a network partner already.
Tell us more please!
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Sorry dude, even Bricknell proved that theory wrong. Comair already has plans for long haul fleet, hear they have a network partner already.
Comair? Sure, perhaps they could scrape up the cash for a few decent aircraft to start up- they just wont have the bucks to keep it going when guys like EK/LH/KL/BA/etc sink their claws into them. As I’ve said before these guys are looking good at the moment because SAA is not on the top of its game- but when you compare them to the likes of LH then Comair is strictly in the amateur league. The Novick’s know this and would therefore defer- concentrating instead on SAA’s regional routes where they stand a better chance at turning a buck- problem is that’s where all the current local airlines will concentrate- turning the whole thing into an uncoordinated bun fight- easy pickings for the likes of KQ who are really moving up the ranks on the continent
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As I’ve said before these guys are looking good at the moment because SAA is not on the top of its game- but when you compare them to the likes of LH then Comair is strictly in the amateur league.
I think the efforts will be concentrated on the domestic scene and once thats running at full tilt against the competition (which I think is being done already!) then maybe it will start looking further afield.
I'm sure with the BA brand attached, big brother may look at spreading its wings from this neck of the woods and I'm sure with that clout, baying wolves and claws will be kept at bay........just a thought!!!
Isn't this going off topic tho'?
Last edited by beechbum; 13th Apr 2007 at 10:35.
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What exactly has ol uncle Vern proved??? what that you can sell tickets for R2000 and make no money? It is a world away from operating a double daily on the LHR route with aircraft that are going to give you the capacity to compete. He just doesn’t have the bucks to invest plain and simple.
I've yet to see "Ol Uncle Vern" get his cash injection. Maybe if he did, he would "have the bucks to invest."
Your attitude of SAA being invincible is the heart of all the problems they are experiencing at present. When you make comments like
It is a world away from operating a double daily on the LHR route with aircraft that are going to give you the capacity to compete.
Please make educated comments - seeing as though you are supposed to be MANAGEMENT.
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Hang on guys, we are not talking about what the current airlines are doing , be it profitable or not. We are trying to establish if any of the current operators will be able to fill the gap before any of the other major airlines take it all.
I very much doubt it that Vern will be able to come up with enough frames to add a 2-3 flights a day to LHR over and above the ones he is operating now. Just remember you will need to have 4-5 aircraft for the rotation alone. Add to that the increase in crewing costs, training and maintenance. We are also talking of no USA flights, which means a higher demand on the Europe flights for the hop across the pond.
We are talking scale of economics here, which means you need to be big enough first before things get cheaper.
Mega Mula upfront... maybe the government knows that it is cheaper to keep on giving money to SAA rather than giving it to foreign carrier.
I very much doubt it that Vern will be able to come up with enough frames to add a 2-3 flights a day to LHR over and above the ones he is operating now. Just remember you will need to have 4-5 aircraft for the rotation alone. Add to that the increase in crewing costs, training and maintenance. We are also talking of no USA flights, which means a higher demand on the Europe flights for the hop across the pond.
We are talking scale of economics here, which means you need to be big enough first before things get cheaper.
Mega Mula upfront... maybe the government knows that it is cheaper to keep on giving money to SAA rather than giving it to foreign carrier.
Paxing All Over The World
If you want to guess at how long SAA will be around - look back at how
long the airlines of newly independent African countries survived. Some
were supported as long as the country as a whole was doing OK and only
got chopped when it was just about all over. Some slid into corruption
and then fell apart from the inside.
The simple fact is that SAA is making it's first bid to slim down and
'get real' by starting Mango. The plot is to slide most of the domestic
off that way and clear the books of the a/c and get pilots off higher
wages onto lower wage contracts. They will either accept a job rather
than no job or they will leave the country. There will not be a sudden
spurt of new jobs at the old pay levels.
However, the problem with the Mango solution is demonstrated, once
again, by history. Many other legacy carriers tried to play this game
and almost all failed. I would say ALL failed but I do not have the full
facts. What is clear is that most attempts to run a LoCo by legacy
carriers failed and they got sold off. Expect that to happen to Mango.
What then for SAA? It will depend upon how much of the problem they
have solved. With high fuel costs and viscious competition, I expect
that they will still be in the dwang in five years time. The
international will continue to be the game to be in and I expect that
will hold up, even if Nationwide do expand their LGW operation and with
the FlyGlobespan MAN route working well. The demand from Europe as a
whole will be around for another 15 years or more.
SAA will certainly be around for 2010 and, I expect, till 2015 in it's
present form.
long the airlines of newly independent African countries survived. Some
were supported as long as the country as a whole was doing OK and only
got chopped when it was just about all over. Some slid into corruption
and then fell apart from the inside.
The simple fact is that SAA is making it's first bid to slim down and
'get real' by starting Mango. The plot is to slide most of the domestic
off that way and clear the books of the a/c and get pilots off higher
wages onto lower wage contracts. They will either accept a job rather
than no job or they will leave the country. There will not be a sudden
spurt of new jobs at the old pay levels.
However, the problem with the Mango solution is demonstrated, once
again, by history. Many other legacy carriers tried to play this game
and almost all failed. I would say ALL failed but I do not have the full
facts. What is clear is that most attempts to run a LoCo by legacy
carriers failed and they got sold off. Expect that to happen to Mango.
What then for SAA? It will depend upon how much of the problem they
have solved. With high fuel costs and viscious competition, I expect
that they will still be in the dwang in five years time. The
international will continue to be the game to be in and I expect that
will hold up, even if Nationwide do expand their LGW operation and with
the FlyGlobespan MAN route working well. The demand from Europe as a
whole will be around for another 15 years or more.
SAA will certainly be around for 2010 and, I expect, till 2015 in it's
present form.
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Anti-Skid Inop,
The only one in need of an education here is you. Here is why:
Flying full means absolutely nothing if you are not achieving a yield that makes it worth your while. If one compares the weighted average fare Nationwide earns on the JNB LGW route with say what SAA earns on the JNB LHR route (excluding first class) Nationwide earns more than 50% less. (SAA and VS have almost identical average fares while BA is slightly higher than both) Not a good start and it gets worse. Nationwide sells most of its inventory through a very small number of travel agents- their supporters are generally agencies who focus on the leisure market and demand big discounts to get the numbers in- hence the low yield. To counter this, Nationwide has attempted to sell more inventory in the UK (60%) not a bad move but again the small number of operators and the deep level of discounts almost nullifies the exchange rate benefit. Furthermore travel agents are the most expensive channel to distribute your inventory- most carriers prefer to move their cheapest inventory via direct channels like the web and call centres to try and reduce the dilutionary effect of these cheap fares on the revenue mix. Nationwide has made little effort in this regard. These agents are also very fickle, if another carrier pops up with a better fare then Nationwide will either have to match or forgo revenue. Not a nice place to be. So Nationwide are coughing up between 12 and 15% -conservatively- in distribution costs before a passenger gets on the plane.
Coming back to the point I raised about competitive action from the desert carriers, the JNB LGW route is the poster child for why these guys exist. Nationwide own 40% of the market- sounds good, however the desert carriers between them own 39% market share (Emirates, Etihad; Qatar and Gulf) and Air Namibia comes in at 13%. Considering all these carriers go via another gateway- the only carrier going direct-Nationwide- is getting plastered. What is even more interesting is that EK (with 20% market share) has an average fare 5% higher than Nationwide’s!! As a point of comparison on the JNB LHR route, EK barely manages 3% market share and has an average fare 30% lower than the carriers operating direct. No prizes for guessing who EK think they can rob market share off in the South African market- with EK going to 18 frequencies per week shortly, this does not bode well.
Not being a cargo guy myself I had a chat with some of the guys in the business. Turns out the London route is a really competitive route for cargo and prices are very negotiable- especially for repeat bookers. Im told 8 tons will generate about ZAR 70 000 in revenue per flight- that equates to what SAA will earn out of selling 4 one way business class fares. Huge profit indeed.
So its really down to operational cost- we know already that Vern pays his pilots less than a call centre agent at SAA earns- so that’s not a problem, the aircraft- well given his desert raiding antics of the past perhaps he scored a bargain. Fuel, well that’s even as we all are in the same boat- save the difference in burn- but that must be measured by the aircraft’s capacity. ACSA, ATNS and other charges are the similar.
Therefore Anti-Skid Inop, do you think that by applying the above business model, Nationwide will be able to make money serving a number of long haul destinations with multiple weekly frequencies? How many cheap aircraft can be found in good condition? How long will he be able to get staff to donate their services virtually for free? (Even Roger the dodger has eventually had to cough up!) etc etc. Chances are you can get away with focussing all your energy on one aircraft- maybe even two, but in the end the model just will not work.
This just shows your ignorance as to what is actually happening. It's time to wake up and smell the coffee. NTW fly near full capacity 4 times a week. They have an extremely high yield as well as an extremely profitable cargo contract ( min 8 tonnes per trip - every trip!!!)
Please make educated comments - seeing as though you are supposed to be MANAGEMENT.
Please make educated comments - seeing as though you are supposed to be MANAGEMENT.
Flying full means absolutely nothing if you are not achieving a yield that makes it worth your while. If one compares the weighted average fare Nationwide earns on the JNB LGW route with say what SAA earns on the JNB LHR route (excluding first class) Nationwide earns more than 50% less. (SAA and VS have almost identical average fares while BA is slightly higher than both) Not a good start and it gets worse. Nationwide sells most of its inventory through a very small number of travel agents- their supporters are generally agencies who focus on the leisure market and demand big discounts to get the numbers in- hence the low yield. To counter this, Nationwide has attempted to sell more inventory in the UK (60%) not a bad move but again the small number of operators and the deep level of discounts almost nullifies the exchange rate benefit. Furthermore travel agents are the most expensive channel to distribute your inventory- most carriers prefer to move their cheapest inventory via direct channels like the web and call centres to try and reduce the dilutionary effect of these cheap fares on the revenue mix. Nationwide has made little effort in this regard. These agents are also very fickle, if another carrier pops up with a better fare then Nationwide will either have to match or forgo revenue. Not a nice place to be. So Nationwide are coughing up between 12 and 15% -conservatively- in distribution costs before a passenger gets on the plane.
Coming back to the point I raised about competitive action from the desert carriers, the JNB LGW route is the poster child for why these guys exist. Nationwide own 40% of the market- sounds good, however the desert carriers between them own 39% market share (Emirates, Etihad; Qatar and Gulf) and Air Namibia comes in at 13%. Considering all these carriers go via another gateway- the only carrier going direct-Nationwide- is getting plastered. What is even more interesting is that EK (with 20% market share) has an average fare 5% higher than Nationwide’s!! As a point of comparison on the JNB LHR route, EK barely manages 3% market share and has an average fare 30% lower than the carriers operating direct. No prizes for guessing who EK think they can rob market share off in the South African market- with EK going to 18 frequencies per week shortly, this does not bode well.
Not being a cargo guy myself I had a chat with some of the guys in the business. Turns out the London route is a really competitive route for cargo and prices are very negotiable- especially for repeat bookers. Im told 8 tons will generate about ZAR 70 000 in revenue per flight- that equates to what SAA will earn out of selling 4 one way business class fares. Huge profit indeed.
So its really down to operational cost- we know already that Vern pays his pilots less than a call centre agent at SAA earns- so that’s not a problem, the aircraft- well given his desert raiding antics of the past perhaps he scored a bargain. Fuel, well that’s even as we all are in the same boat- save the difference in burn- but that must be measured by the aircraft’s capacity. ACSA, ATNS and other charges are the similar.
Therefore Anti-Skid Inop, do you think that by applying the above business model, Nationwide will be able to make money serving a number of long haul destinations with multiple weekly frequencies? How many cheap aircraft can be found in good condition? How long will he be able to get staff to donate their services virtually for free? (Even Roger the dodger has eventually had to cough up!) etc etc. Chances are you can get away with focussing all your energy on one aircraft- maybe even two, but in the end the model just will not work.
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Time and time again governments have recognised the need for a state owned airline operation. It is of economic necessity, no matter what certain ill-informed individuals might think, the basic survival of a nation is based on its ability to sustain an infrastructure. An airline is part of that infrastructure.
Why do we pay taxes (although excessive in some cases, which I'm against), is because we are societal beings. Certain material requirements are needed for the sustainability of human life in a collective. For eg. roads, electricity, communication, water, sewage, etc. Transportation is the category we as (insecure/egotistical/self-centered/paranoid) pilots are most concerned with, which is also a basic neccessity for the survival of a nation.
Anyone whose studied economics at even first year level will understand this concept. If theoretically a government was to do away with its state controlled airline, the gap created (if taken over by a private consortium), only tends to widen the welfare triangle, which means a slide backwards.
If one argues that the US carriers are totally privatised, I disagree. Take a deeper look at what happened after 9/11. The American government have a law called chapter 11, to deal with dire times such as that, this then protects economically pertinent companies. The US government protected the total collapse of its main carriers...in normal circumstances such businesses would have closed down for good.
Again....narrow minded individuals need to remove their blinkers and consider the bigger picture, life's not just about you, your family and career (command in three years as opposed to ten, really now!)
Why do we pay taxes (although excessive in some cases, which I'm against), is because we are societal beings. Certain material requirements are needed for the sustainability of human life in a collective. For eg. roads, electricity, communication, water, sewage, etc. Transportation is the category we as (insecure/egotistical/self-centered/paranoid) pilots are most concerned with, which is also a basic neccessity for the survival of a nation.
Anyone whose studied economics at even first year level will understand this concept. If theoretically a government was to do away with its state controlled airline, the gap created (if taken over by a private consortium), only tends to widen the welfare triangle, which means a slide backwards.
If one argues that the US carriers are totally privatised, I disagree. Take a deeper look at what happened after 9/11. The American government have a law called chapter 11, to deal with dire times such as that, this then protects economically pertinent companies. The US government protected the total collapse of its main carriers...in normal circumstances such businesses would have closed down for good.
Again....narrow minded individuals need to remove their blinkers and consider the bigger picture, life's not just about you, your family and career (command in three years as opposed to ten, really now!)
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Jetnut
Are you for real or are you just baiting us?
So which Governments have recognised this and which Governments have proven record of running successful state-owned airlines in the 21st century. Do please enlighten us........who have you got in mind Swiss, Sabena, Alitalia
Aviation is of strategic importance but the potential of business is only truly liberated when creative and entrenpenurial talent is left to get on with competing for business and taking commercial risks. A generalisation here: who are the kinds of people that work for the government? - those in need of security, those who are risk averse, it is not the mindset you will find at the heart of successful business. In other words civil servants do not run airlines.
Regarding the US carriers I agree up to some point. But that doesn't make their chapter 11 laws right? The US is massively guilty over double standards with regard to free-trade and those who preach free trade with one hand are always beholden to beef farmers in Texas or steel workers in Pittsburgh. Cast your mind back and look at the boom that followed deregulation of the US domestic market in the late 70s and then tell me that free-trade isn't a good thing for aviation.
Are you for real or are you just baiting us?
Time and time again governments have recognised the need for a state owned airline operation. It is of economic necessity, no matter what certain ill-informed individuals might think, the basic survival of a nation is based on its ability to sustain an infrastructure
Aviation is of strategic importance but the potential of business is only truly liberated when creative and entrenpenurial talent is left to get on with competing for business and taking commercial risks. A generalisation here: who are the kinds of people that work for the government? - those in need of security, those who are risk averse, it is not the mindset you will find at the heart of successful business. In other words civil servants do not run airlines.
Regarding the US carriers I agree up to some point. But that doesn't make their chapter 11 laws right? The US is massively guilty over double standards with regard to free-trade and those who preach free trade with one hand are always beholden to beef farmers in Texas or steel workers in Pittsburgh. Cast your mind back and look at the boom that followed deregulation of the US domestic market in the late 70s and then tell me that free-trade isn't a good thing for aviation.
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Originally Posted by JetNut
If theoretically a government was to do away with its state controlled airline, the gap created (if taken over by a private consortium), only tends to widen the welfare triangle, which means a slide backwards.
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Induldge me for a minute...think about this,
To a certain extent many have pushed for open skies, but have you ever wondered why countries are so reluctant. Even a free trade economy such as the EU are reluctant to a 100% open skies agreement, why? Strategic economic neccessity.
The South African government have been dabbling in fifth freedom rights. What does this mean... guys like Emirates etc, with their capital-might, can take over the Southern African skies over night. The government has considered this, do they really want another nation controlling a vital part of the transport system? I think not. Aviation is a whole new ball game as compared to other industries (retail, finance etc). This is a truly global business. Like it or not, carriers must do business with other nations so as to conduct normal business.
But, don't get me wrong, I agree with total open-skies (Adam Smith (and I think he's cool!) hit on a novel idea regarding international trade), if everybody played according to the same rules though, without dirty tricks and backstabbing (yanks famous for this). then, yes, it is the consumer who will ultimately benefit. But certain countries, such as the Gulf states, have very controversial business regulations as compared to ours (I bet Emirates don't pay for fuel in Dubai). Latent disparities could prove devastating for the aviation industry in SA as a whole.
So, you tell me, is a free trade system in the airline industry really feasible?
To a certain extent many have pushed for open skies, but have you ever wondered why countries are so reluctant. Even a free trade economy such as the EU are reluctant to a 100% open skies agreement, why? Strategic economic neccessity.
The South African government have been dabbling in fifth freedom rights. What does this mean... guys like Emirates etc, with their capital-might, can take over the Southern African skies over night. The government has considered this, do they really want another nation controlling a vital part of the transport system? I think not. Aviation is a whole new ball game as compared to other industries (retail, finance etc). This is a truly global business. Like it or not, carriers must do business with other nations so as to conduct normal business.
But, don't get me wrong, I agree with total open-skies (Adam Smith (and I think he's cool!) hit on a novel idea regarding international trade), if everybody played according to the same rules though, without dirty tricks and backstabbing (yanks famous for this). then, yes, it is the consumer who will ultimately benefit. But certain countries, such as the Gulf states, have very controversial business regulations as compared to ours (I bet Emirates don't pay for fuel in Dubai). Latent disparities could prove devastating for the aviation industry in SA as a whole.
So, you tell me, is a free trade system in the airline industry really feasible?
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George Tower, I will give you an A+ for your notion on government employees.
The fundamental problem with governement employees is that they are usually the under-achievers at university. Yes, they are probably in it for the job security, and are terribly risk averse. This then is the dillema. How does one get free-thinkers, entrepreneurs, to work in a state owned organisation. If you can find the solution, I'm sure you'll be up for the next Nobel prize.
The fundamental problem with governement employees is that they are usually the under-achievers at university. Yes, they are probably in it for the job security, and are terribly risk averse. This then is the dillema. How does one get free-thinkers, entrepreneurs, to work in a state owned organisation. If you can find the solution, I'm sure you'll be up for the next Nobel prize.
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Quote JetNut:
“if everybody played according to the same rules though, without dirty tricks and backstabbing (yanks famous for this). then, yes, it is the consumer who will ultimately benefit”.
Was not going to comment on JetNut’s narrow minded posts but could not help to laugh at this one!!
So S.A.A. played fair when they used tax money to close down FlightStar, or when they did Sun Air over, or when they sold tickets at a loss to try and force Comair ( before B/A partnership ) and Nationwide out of business. Was there not some big fine slapped on S.A.A. for “dirty tricks” with the travel agents? And the lists go on…………….don’t think this is too beneficial to the consumer.
“if everybody played according to the same rules though, without dirty tricks and backstabbing (yanks famous for this). then, yes, it is the consumer who will ultimately benefit”.
Was not going to comment on JetNut’s narrow minded posts but could not help to laugh at this one!!
So S.A.A. played fair when they used tax money to close down FlightStar, or when they did Sun Air over, or when they sold tickets at a loss to try and force Comair ( before B/A partnership ) and Nationwide out of business. Was there not some big fine slapped on S.A.A. for “dirty tricks” with the travel agents? And the lists go on…………….don’t think this is too beneficial to the consumer.
