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National airline will not be privatised – SAA CEO

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Mr Vuyani Jarana, CEO of South African Airways (SAA), has reiterated that there are no plans to privatise the airline. He was replying to a question on the issue posed to him at the 2018 Southern African Transport Conference (SATC) currently underway at the CSIR International Convention Centre in Pretoria.

Mr Jarana explained that trade union Solidarity had taken steps to place SAA into business rescue. He said that Solidarity had done this because it wanted a sustainable national airline that would not retrench staff and which included private sector participation. The labour union further desired an airline that is not a burden to the fiscus.

“We have ongoing conversations with a number of unions, although Solidarity was not a part of the conversations initially. We brought them in to understand the context of what they are trying to achieve through the process of business rescue. We explained that what they want to achieve has already been stated by the government, so there is no need to go through a business rescue.”

The South African government pronounced in 2017 that it would include private sector participation in SAA and that there will be an equity partner involved. “We need to make the business attractive to potential suitors. Treasury is looking to move that process forward. But we do not believe that entering into business rescue will achieve different results from what we are doing.”

Mr Jarana said the airline needed to amend the commercial delivery side of its operations. He explained that the framework to do this needed to be correct.

“We are trying to bring back the commercial logic. We are in the business of moving customers from one point to another safely and comfortably. But we also have to do this profitably. So, commercial logic is about understanding the market; knowing where to fly; how we fly and how frequently we fly, while balancing customer demands and expectations. It is also about how SAA buys assets and at what price,” he said.

“We are taking a comprehensive review of the heart of the business. The good thing about SAA is that the airline’s operations are solid; it is a good airline that has a challenge with its business logic. We have to make hard decisions as a business. We have looked at what the market is telling us, which is that there is more demand for low-cost carrier services.”

Mr Jarana conceded that most of SAA’s domestic routes are plagued by negative gross profit margins. “We will restrict the inventory of full service carriers because we are carrying passengers where we have no prospect of making money.

“We are also bringing back skills. It’s about the culture and dealing with the psychology of the organisation. It needs to understand that we fly for profits. All of this is going to take a long time; it’s not going to be easy. But we are focused on doing what is right.”

Mr Jarana indicated that SAA had decreased the flight frequency to London from two flights a day to one flight a day. This made logical sense given that neither of the two flights was regularly full. SAA would reserve the opportunity to return to two flights a day to Heathrow International Airport once the airline is better organised.

He said there was nothing more important than clarifying the current state of affairs at SAA, and added that explaining the situation at the airline and adopting an open-doors policy was assisting with ongoing labour union engagements.

He said SAA was trying to soften the blow where retrenchments were concerned, which included actively discussing the possibility of temporarily providing pilots and cabin crew to other carriers, among other measures.

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