The separation of state-owned South African Airways (SAA) from its parent company, Transnet, should be completed by the end of the year, says Minister of Public Enterprises Alec Erwin.
Erwin, who briefed members of the National Assembly public enterprises committee at Parliament on Tuesday on his upcoming budget vote, said budgeting and investment are more coherent “off a separate balance sheet”. This is much more logical and focused.
He said that revenue returns for SAA “are going to be very heavily influenced by dollar earnings and euro earnings, and with Transnet that is not the case”.
Asked if there are non-core activities of SAA that it should not be involved in, Erwin said: “Not particularly. We will have a look at that. There may be some small things but basically SAA is reasonably coherent.”
Asked by committee chairperson Yunus Carrim, an African National Congress MP, about the high costs of internal flights on SAA compared with such competitors as Kulula, he said: “This is the challenge that every airline in the world is facing.
“It is one we are very alive to at SAA. Very few airlines mix low cost with the normal [cost]. They normally separate these investments out. Kulula could not provide the network of services that SAA provides. But we are looking at that.”
However, he said, clearly the African continent needs low-cost airlines.
“It is an exciting challenge that we are grappling with both as the shareholder [the government]. I think SAA is doing well in terms of image. Its position as a standalone company will strengthen it, not weaken it.”
In the industry, there are tough negotiations, such as those with the United Kingdom.
“Our problem is that we can get frequent links with the UK but to what airport and what time?”
Everyone wants to get to Heathrow rather than to a secondary airport, he said.
“These are part of the tough negotiations that are taking place. We are strengthening the airline … we keep trying to change the image of SAA as an African airline.”
SAA is bringing back business and first-class sections because in Africa there is a class that can afford those seats
“We are definitely reversing a tendency to underplay business and first class that was there a few years ago,” the minister said.
SAA has a modern fleet that is doing well.
“I think we can turn this around. The basic economics are in favour of SAA if it is managed well.” — I-Net Bridge