May 17, 2013
Network changes likely to flow after SAA links up with EtihadBack
Abu Dhabi|Beijing|Johannesburg|Africa|Airbus|Aircraft|Aviation|Boeing|Components|Engines|Etihad Airways|Flow|Projects|South African Airways|transport|Africa|Asia|South America|China|South Africa|United Arab Emirates|OR Tambo International Airport|Airline|Embattled Airline|Equipment|Flow|Maintenance|Services|James Hogan|Nico Bezuidenhout|Power|Middle East
© Reuse this
Following the signing of the memorandum of understanding by Etihad president and CEO James Hogan and acting SAA CEO Nico Bezuidenhout in Johannesburg, SAA would be in a position to place its ‘SA’ code on 12 Etihad destinations in the Middle East and Asia, serviced out of Abu Dhabi.
In return, the UAE carrier would place its ‘EY’ code on flights from OR Tambo International Airport to ten other destinations in South Africa, Africa and South America.
Bezuidenhout refused to be drawn on which routes might be terminated. But it had been widely speculated that SAA was keen to extricate itself from flying directly to Beijing, China, while still offering it as a destination through partnership arrangements.
He said the Etihad association could enhance yearly revenues by more than R100-million. However, it should also be viewed as part of a broader thrust to lower SAA’s operating costs and return it to profitability in the coming years.
The embattled airline, which reported a loss of R1.3-billion in 2011/12 and cumulative losses of more than R14-billion over the last number of years, was currently pursuing 38 separate ‘cost-compression projects’ and had reportedly shaved R1.2-billion off its costs in 2012/13 – its results would only be released at its annual general meeting in September.
However, Bezuidenhout indicated that the airline was still about 20% “off the mark”, compared with the operating costs of other airlines, and that part of the remedy lay in the use of partnerships.
There was also potential, in the longer term, for SAA and Etihad to combine their purchasing power in a bid to lower the cost of procuring everything from aircraft and maintenance services through to catering equipment and aircraft components.
Hogan said it was premature to speculate on what the relationship could mean for SAA’s wide-body refleeting plan, but he indicated that the airline had worked with a number of its other partners in sourcing aircraft, engines, components and catering services.
Bezuidenhout said SAA intended to engage with both Airbus and Boeing on its fleet needs, but also indicated that it would “avail” itself of Etihad’s prowess in this area.
Likewise, he saw a myriad of other “value-chain opportunities” arising out of the “scale” offered by the two airlines, which collectively transported 20-million passengers yearly.
For Hogan, the rationale for the tie-up arose from the fact that Africa had emerged as one of the fastest-growing aviation markets globally, with the International Air Transport Association forecasting yearly compound growth of 6.8% in African air-passenger travel between 2013 and 2016. Air cargo, meanwhile, was expected to rise by more than 4% over the same period.
Participation in that growth, Hogan said, was key to sustaining Etihad’s position as one of the fastest-growing airlines internationally.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
Creamer Media Senior Deputy Editor
Other News This Week News
Recent Research Reports
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
This Week's Magazine
Energy analyst and EE Publishers MD Chris Yelland warned recently against excessive optimism regarding timescales for the proposed construction of new nuclear power plants (NPPs) in South Africa. He was speaking at a Nuclear Roundtable in Johannesburg. “I think we...
Malawi’s Lilongwe Water Board (LWB) is inviting eligible bidders to prequalify for the board’s efficiency improvement works, which will be implemented as part of the E24-million Lilongwe Water Resources Efficiency Programme. LWB CEO Alfonso Chikuni explains that...
CROATIA, AN EU MEMBER BUT NOT A TDCA MEMBER On July 1, 2013, Croatia officially became the twenty-eighth member of the European Union (EU). Despite Croatia’s accession into the EU, it is yet to become party to the Trade, Development and Cooperation Agreement (TDCA)...
The Council for Scientific and Industrial Research (CSIR) has announced that its new Inundu airborne electronics testing, evaluation and training pod had made its first test flight on September 10. The successful flight was undertaken from Lanseria International...
The Development Bank of Southern Africa (DBSA) – which disbursed a record R13-billion during 2015, from R12.7-billion in the prior year – remained optimistic that it could ramp-up loan disbursements to R25-billion a year by 2018 as it sought to give greater emphasis...