Is SAA heading for a crash-landing? Disaster for Tourism!

SAA has been in the news in the past few days for all the wrong reasons, eight of its eleven Board members having resigned in what must signal the lack of confidence in the management of the airline and its future.  As our tourism industry is strongly reliant on SAA to bring tourists to the country, and to Cape Town specifically, the SAA situation is of vital importance to all tourism players.

Cheryl Carolus, Chairman of the SAA Board, is one of the Directors who resigned, with Bonang Mohale, Russell Loubser, Louis Rabbets, Jabulani Ndhlovu, David Lewis, Teddy Daka, and Maggie Whitehouse, but she has not motivated her decision.  Russell Loubser has been vocal, saying that SAA, SA Express, and Mango deserve the support of the South African government, being its largest shareholder, but that they are not receiving it, reported The Citizen. Loubser called for emotional, financial, and moral support, given the economic downturn and the competitive airline industry. The operations of the company have had to be executed in accordance with the Public Finance Management Act, he said, which meant that they could not run the company as a commercial enterprise, in which they would ordinarily hire and fire staff, or change routes. ‘But a company like SAA which is totally dependent on the government requires in return the total support of the shareholder. And right now it is finding it difficult to work with the shareholder’.  Issues that have been tabled for months do not get resolved, Loubser explained, particularly the burning issue of an additional R6 billion which the airline requested from the government to execute a strategic plan which had been approved by the government. He said that in the past three years since he had been a member of the SAA Board, the company had ‘never been properly capitalised’.

The resignations were precipitated by the delay in the tabling of SAA’s Annual Report by the deadline of 30 September, as the auditors had not finalised the financial statements, and the funding request not having been finalised with the Treasury, reported The Times. The funding requested is to cover fleet replacement costs, the introduction of a premium economy class, and the extension of business class cabins on long-haul flights. Yet Ms Carolus stated that the Minister is ‘lying’, as the financial statements have been completed, and withholding them is ‘illegal’, reflecting on the Board directors, reported The Times today. The Annual Report for SA Express was also delayed.  Last year the financial statements for SA Express had to be withdrawn, when found to be ‘materially misstated’. Last month the Minister fired all except one Board member of SA Express, for accounting errors going back to 2008!

Earlier last week Ms Carolus had summarised the Board’s achievements as flying to new destinations, sacrificing domestic routes to the benefit of international routes, modernising and increasing the fleet, and in addressing fraud and corruption.

Minister of Public Enterprises Malusi Gigaba appointed eight new directors to caretake the Board positions, with Vuyisile Kona as the new Chairman, and Andile Mabizela, Andile Khumalo, Bonisizwe Mpondo, Dr Rajesh Naithani, Carol Roskruge, Raisibe Lepule, and Nonhlanhla Kubeka as the new Directors, representing expertise in the fields of aviation, management, state governance, and finance, and which he said would assist the government in ‘propelling the airline to greater heights‘!  The Minister issued a statement, describing the resignation timing as ‘bizarre’, and condemned ‘the leakage of confidential government information’ as an ‘abuse of free speech’, without explaining what information leak he is referring to.  The Minister also explained that the term of most Board members would have come to an end anyway, at the scheduled AGM on 15 October.  The Minister assured staff, passengers, and suppliers that the Board resignations would not disrupt the operations of SAA.

Cape Town’s tourism industry was badly hit by SAA’s decision to close down its Cape Town – London direct flight route in mid-August, selling one of its three slots at Heathrow, and creating a Southern African hub in Johannesburg, forcing all international SAA flights to land in Johannesburg, and then connect to Cape Town on a domestic flight.  This strategy is proving fatal for tourism, as we continuously receive feedback that international flights arriving simultaneously at OR Thambo airport are causing Passport Control and Baggage Collection congestion, meaning that the connecting flights are missed by international visitors, for which SAA tries to cash in on ticket change charges!  This is a dreadful first tourist impression of our country!

The declining quality of SAA’s food and beverage service and poor hostess service was well-documented by German wine writer Mario Scheuermann, who flew from Frankfurt to Johannesburg, to attend CapeWine 2012 in Cape Town last week.  He wrote that the wines were of sub-standard quality, and ran out two hours after take-off, that the food was dreadful (his photograph), and that the mineral water had run out before landing in Johannesburg.  The party of German VIP visitors missed its connecting flights due to the congested airport facilities, and had to wait for three hours to catch a new connecting flight to Cape Town!

Despite this sounding unpatriotic, we would encourage international visitors to fly to Cape Town with any airline other than SAA, and to avoid flying into the country via Johannesburg at all costs!  Direct Cape Town connections are or about to be offered by BA and Virgin from London, by Edelweiss from Zürich, by Lufthansa from Munich, by Emirates from Dubai, by Air France from Paris, by Turkish Airlines from Istanbul, and from Amsterdam by KLM.  Maybe  the cancellation of SAA’s Cape Town-London route is a blessing in disguise for our city, given the poor reports about the airline’s service and quality!

POSTSCRIPT 2/10: Swedish guests checking in at Whale Cottage Camps Bay today praised the ease of connection via Swiss from Copenhagen to Zürich, and then the direct flight by Edelweiss to Cape Town, for its friendly service and fantastic price of R 5500 each for the full return trip.

POSTSCRIPT 2/10: Today it was announced that the government has given SAA a ‘guarantee’ of R5 billion!

POSTSCRIPT 2/10: Southern African Tourism Update has published a letter today from a tour operator reporting on two client flight cancellations due to overbooking, handled unsympathetically by SAA staff.

POSTSCRIPT 3/10: Mario Scheuermann has shared the details of his return journey on SAA two days ago.  The food quality was slightly better, there was more wine available but the quality offered still was poor.  There was a problem with the cooling, so all beverages were warm, i.e. not cooled!  The service was equally poor.  Interesting would be to hear the evaluation of the food and wine offering by the SA Culinary Olympics team, which was on the same flight to Frankfurt!

POSTSCRIPT 7/10: The Times reports that the smaller independent airlines are furious that SAA has been given a R 5 billion lifeline by the government, saying that this is driving low-cost airlines out of business. Nine out of 11 airlines that started operating locally in the past 20 years have gone into liquidation, mainly due to an oversupply of domestic seats, ‘a legacy of the optimism of 2010’. Now 1time wants a bail-out by the government too.  The small airlines are asking for a cut in the fuel levy, as well as reduced fees for ACSA, Air Traffic Navigation Services, the SA Weather Service, and the Civil Aviation Authority.

POSTSCRIPT 10/10: Southern African Tourism Update reports this evening that the new Chairman of the SAA Board is questioning why the Cape Town – London route was cancelled, and is apparently in talks with the Mayor of Cape Town Patricia de Lille to reinstate the route.  One wonders why he is not talking to our Western Cape Minister of Tourism Alan Winde, the CEO of Wesgro Nils Flaatten, and/or Cape Town Tourism CEO Mariette du Toit-Helmbold!  One of the three SAA slots at Heathrow have been sold, which may make the reinstatement difficult.

Chris von Ulmenstein, Whale Cottage Portfolio: www.whalecottage.com Twitter: @WhaleCottage

6 replies on “Is SAA heading for a crash-landing? Disaster for Tourism!”

  1. Dave Snoek says:

    Hello Chris.
    Another bailout for SAA!!! This time 5 Billion Rand bailout!!! What chance do independent carriers have to be competitive?
    My heart bleeds for us all.

  2. Thanks for the update Dave, which I’ll add as a Postscript.

    Scary to think that little of it will go towards improving the quality of food, beverages and service!

    Chris

  3. Nigel says:

    Very simple answer… DO NOT FLY SAA, I took that descision 15 years ago and have not spent a cent with them since and nor will I again in the future untill they realise that the “Customer is King” NOT SAA…..

  4. I agree Nigel, I also stopped flying SAA many years ago.

    Chris

  5. Nick Jones says:

    Fortunately as I always fly BA I couldn’t possibly comment. However, as the Rand heads towards the good old days as the Forex approaches ZAR 14.00 to the £, the tourist industry will surely begin to see an improvement.

  6. Thank you for sharing the good news Nick – I haven’t looked for a while.

    Have a super weekend

    Chris

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