UPDATE: Impact of SAA exit on SA weighed

2019-11-29 04:45 - Selene Brophy
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UPDATE: Impact of SAA exit on SA weighed by AASA 

South Africa’s domestic air transport market is one of the most robust in Africa, with local carriers engaged in fierce competition.

It benefits the entire economy by providing choice, affordable, safe and reliable connectivity to destinations and markets throughout the country, while reducing the cost of travel and doing business – and therefor it must be maintained, says Chris Zweigenthal, Chief Executive of the Airlines Association of Southern Africa (AASA).

AASA’s members include all of the domestic airlines in South Africa and most airlines in the SADC region and the Indian Ocean islands. 

Zweigenthal says President Ramaphosa’s decision to have South African Airways (SAA) placed under immediate business rescue – not only provides some security and clarity for South Africa’s air transport, trade, logistics, travel and tourism sectors – but it also has broader socio-economic context. 

While the airline has stated it will manage any business operations responsibly – its current flight schedule is unaffected at this point, including Mango flights.

Of the more than 3 000 South African business that have been placed in business rescue since 2011 – only a third are still in business (read the full BI story here). The high level of co-dependence across the industry with SAA playing a significant role must be noted though. Zweigenthal explains it as follows: 

  • SAA Technical (SAAT), which, in addition to SAA and Mango, is contracted by BA-Comair and Kulula to maintain their aircraft. 
  • SAA provides financial administrative and disbursement services to its code-share and franchise partners, SA Express and Airlink. 
  • The tariffs and charges in respect of the Airports Company South Africa, Air Traffic and Navigation Services, SA Weather Service and SA Civil Aviation Authority are predicated on an expected number of flights and passengers. So too are their capital expenditure infrastructure programs. 
  • The entire industry value chain, from the airlines, air transport infrastructure and service providers through to the tourism, trade, logistics, engineering and construction sectors require predictability in determining their operations, managing their revenues, cash flow and costs. 
  • The air transport and tourism industry, which Government has identified as a primary strategic sector to create jobs and drive economic growth, are vulnerable to any sudden loss of market confidence and loss of bookings as a result of cancellations. 

The industry also has important macro-economic contribution to South Africa, with the air transport and broader travel and tourism industry directly, indirectly acting as a catalyst for more than 470 000 jobs and contributing about USD9.4bn (about ZAR150bn) in gross value add representing 3.2% of South Africa’s GDP. 

READ: Oxford study shows the full value of SA's aviation and air transport sector

Zweigenthal says this debunks the myth that the air transport industry is a service to the wealthy.

“On the contrary, it is a socio-economic lynchpin for South Africa and everyone who lives here.  The net effect of any uncontrolled SAA exit, against which the air transport and tourism industries are unable to implement contingency plans, would be slowed, or even negative, economic growth, which will compound fiscal shrinkage.”

As a result, he says SAA’s Business Rescue proceedings must provide the aviation and allied industries the “ability to adjust, adapt and ensure that their customers, the markets and communities they serve, are provided with sustainable, competitive, capable, reliable and safe services”.

UPDATE: Airlink welcomes business rescue clarity to stem 'uncontrolled collapse' of SAA

South African Airways (SAA) will be revising its operation schedule as business rescue proceedings get underway. 

"The SAA flight schedule currently published remains in place and customers and the markets will be duly notified in the event there are operational changes. Any changes will be managed responsibly," says SAA spokesperson Tlali Tali.  

READ: SAA revises schedule as business rescue gets underway with added R2bn lifeline 

Minister of public enterprises Pravin Gordhan confirmed on Thursday, 5 December that SAA will be placed under immediate business rescue, with SAA issuing a statement on Wednesday saying it was the "unanimous conclusion to its considerable financial challenges". 

Flight Centre has stood firm on its position to continue the ban on SAA tickets sales from its online inventory - while Travel Check has started selling SAA flights again - saying it will leave it up to the traveller to decide to book or not.

READ: The Importance of Travel Insurance, but how does business rescue proceedings affect your cover?

Airlink has issued a statement saying, as an SAA code-share and franchise business partner, it welcomes President Ramaphosa’s instruction and the SAA Board’s decision for SAA to be placed in Business Rescue and the associated funding commitment - averting "any immediate and uncontrolled collapse of SAA, and should provide clarity and greater security to Airlink, SAA’s other creditors and stakeholders, but most importantly the traveling public and our customers". 

“As a creditor and business partner, we have been concerned about SAA’s financial crisis. However, Airlink is a financially sound, commercially agile and robust business with the resilience to see out the storm. Airlink customers can be assured there will be no disruptions to our schedule as a result of the latest SAA developments and we will continue to do business as usual," says Airlink CEO and Managing Director, Rodger Foster. 

UPDATE: Travellers advised to double-check insurance as booking sites pull the plug on SAA flights 

Uncertainty about a state bailout has seen Flight Centre and Travel Check refusing to sell South African Airways (SAA) tickets, as Public Enterprises Minister Pravin Gordhan calls on the public to support the airline. 

Following strike action and the current lack of confidence in the stability of SAA there have been several knock-on disruptions travellers need to be aware of. Online travel agents (OTAs) have taken the cautious road, to ensure their customers come first. Flight Centre has also confirmed its main insure is no longer providing cover for insolvency for travel with SAA. 

READ: SAA Pilot writes emotional letter, sharing what it's like working at the ailing airline

Otto de Vries, CEO of the Association of Southern African Travel Agents (ASATA) says, “ASATA are closely monitoring the situation at SAA and working closely with its members to understand the risks and concerns of customers. We are also in talks with SAA and government stakeholders in an effort to try to manage the situation.”

“We are entering the peak holiday season for South African travellers and every effort must be made to ensure that their holiday plans are not disrupted,” says de Vries.

ASATA urges travellers to check their travel insurance cover to ensure they can travel with peace of mind, with minimal disruptions should the crises at SAA worsen. 

READ: What to do when your flight gets cancelled

SA travel booking sites pull the plug on SAA flights 

Online booking sites are refusing to sell airline tickets for embattled national carrier South African Airways (SAA) - as uncertainty about a state bailout has seen insurance companies refusing to offer insolvency cover for travel with the airline.

Andrew Stark, managing director for the Flight Centre Travel Group in the Middle East and Africa, confirmed the travel company would no longer be selling SAA tickets on Thursday evening, reports Fin24.

"Over the last month there have been several publications in the media regarding ongoing concerns in respect of the financial stability of South African Airways," it states. 

Flight Centre's preferred travel insurance provider, along with "a number of other global insurance providers" are no longer willing to cover SAA for insolvency, in the face of an unstable financial future, further exacerbated by a week-long strike and no guarantee coming from the state.  

Newcomer to the online travel booking playing field Travel Check also confirmed the OTA stopped selling SAA tickets on Thursday. 

CEO Odette Falling told Traveller24, "We have our clients best interest at heart and we are uncertain about SAA’s future right now. Because of that we have temporarily suspended selling SAA flights on the Travel Check website. As soon as we hear more positive news we might reinstate selling the airline again"

Falling said not everybody uses travel insurance, when asking if the move was motivated in the same way as Flight Centre.

"As a proudly South African company we want to support the national carrier but our customer‘s interest needs to be considered first in this case."

While these two OTAs have opted for safety for their travellers first and foremost, a search by Traveller24 on key SAA routes like Sao Paulo and Washington via TravelStart and Flight Site yielded SAA ticket options.

As travellers approach the peak festive season travel period, confidence in the airline is at an all-time low after the recent strike, announced after restructuring plans to cut some 938 jobs cost the airline an estimated R50m a day - with the airline saying it was unable to pay salaries in December. 

SAA and South African Airways Technical (SAAT) have also been embroiled in safety and compliance issues with the South African Civil Aviation Authority previously grounding local airlines serviced by SAAT, as a result of a negative audit at the time. 

READ: Comair and SAA grounding: Protocol inadequacies in SA aviation come to light as 5 core concerns in SAAT audit unpacked

Certain corporate companies have issued notices, advising staff to book with alternative airlines, with the communication referencing the Safety concerns reported on SAAT. 

Multichoice being one such company issuing the following notice, “MultiChoice Travellers are requested to refrain from travelling on SAA, Mango, SA Express both locally and internationally due to recent news reports. If no alternative is available, it is at the travellers’ discretion to travel on these airlines.” 

Traveller24 has contacted SAA spokesperson Tlali Tlali but has yet to receive a response. 

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